Divergent views colour the outlook for the property market in 2020. It may be a good thing.
After six years of sluggish market sentiments, the outlook for 2020 is the most divided to date. On one hand, developers are of the view that the property market in 2020 and 2021 will remain subdued, while some other market participants predicted quite the opposite. Then there are those who prefer to keep a neutral stance.
The truth, according to a prominent property consultant, is that no one really knows how the market will perform in the next two years given the many uncertainties swirling around the country such as political and economic unpredictability.
The other usual suspects are oversupply, lagging income levels compared to cost of living and continued difficulties in obtaining loans. Not even a tentative solution to the US-China trade war offered a glimmer of hope as most observers believe the wider trade war will continue for a longer period.
Still, PropertyGuru despite its neutral outlook, said it sees glimmers of opportunities, partly due to market-friendly measures announced in Budget 2020. Among the measures are positive interest rates, and reducing the minimum purchase price for foreign purchase to RM600K from RM1 mil.
But overall, it sees a moderate market ahead – based on pricing movements derived from PropertyGuru Market Index (PMI) Q3 2019, which showed asking prices for properties across the board had declined in three out of four major markets in Malaysia, namely Kuala Lumpur, Selangor and Penang.
The index revealed that overall, prices in Malaysia declined 0.9% YoY in the third quarter, with Penang leading the contraction with a 1.5% quarter-on-quarter (QoQ) decrease in its PMI from 94.8 to 93.4 in Q3 2019.
Johor was the only domestic market which exhibited no decrease in its index; however, it also failed to showcase growth, with a static PMI of 98.5 in the third quarter.
“With the exception of Johor, these downticks in asking prices are representative of downward movements in longer-term trendlines across key markets since 2015. While asking prices aren’t necessarily interchangeable with transaction prices, they serve as benchmarks for seller sentiment, and as such, point towards moderate prospects at best for 2020,” says Sheldon Fernandez, Country Manager of PropertyGuru Malaysia.
BNM has cut interest rate in May 2019 which is to be followed by another in mid-2020, according to analysts. This will encourage home purchases but its impact is counterbalanced by external market gyrations such as the US-China trade tensions, slowing growth in China, and volatility in the Ringgit.
BOOM for residential?
Charging in to deflect the rather pessimistic outlook overall is the newly merged entity called Juwai IQI. Considered one of the largest real estate groups in Southeast Asia with more than 7,000 agents, its newly established Juwai IQI Residential Property Survey & Index Q4 2019 appears to run counter to the prevalent sentiment.
Based on a survey of 386 Malaysian real estate agents conducted online between 6 and 21 November 2019, the survey findings concluded that residential real estate prices, rents, and sales numbers will increase significantly in 2020 and 2021, both nationally and in the eight states preferred for investment, according to its press release.
“Industry experts are bullish on the outlook for one year and two year growth in residential real estate prices, rents, and market activity nationally and in all eight surveyed states. Will 2020 be boom-time for Malaysian real estate?”
Kashif Ansari, Group Executive Director of Juwai IQI, said: “Industry experts expect all buyer groups to purchase more real estate in the year to come. Nationally, 64.7% of respondents expect local first-time buyers to close more transactions over the next 12 months. Local upgrade buyers are expected to purchase more property in the coming year by 61.2% of respondents, local investors by 65% of respondents, and foreign buyers by 79.7% of respondents. Note that these forecasts do not specify the scale of the increase in transaction numbers.”
Further, Juwai.com Executive Chairman Georg Chmiel said: “In 2020, we expect the economy to grow by 4.3% to 4.8%, even in the current unsettled global environment. Malaysia’s exports and trade surplus will grow in 2020. The country is attracting companies and operations that otherwise might have gone to China. The lower price threshold for foreign buyer purchasing will also help absorb some of the unsold inventory.”
Jury still out
Given the divergent views, which one would hold sway; market up or down? Taking all views into consideration, we believe it’s a matter of time before the upturn comes. Whether it’s this year or next or 2022 will depend on our political and economic performance with external influences playing a small part.
There is underlying strength in Malaysia’s economy but whether it can be unlocked depends on our government’s policies and private sector’s initiatives (which are limited in many ways). Priority must be given to restore the public’s confidence in the country by lifting up the economy and reducing politicking. Then only will sentiments improve for big ticket items like property.
Perhaps a restructuring of the economy or at least the property market is long overdue?
How The Government Can Stimulate Our Property Market?
They should tweak the lending policy, for example, by giving longer loan tenure and multigenerational loans. If needed, implement drastic solutions like stopping approvals for housing developments until the current stock runs out. Thirdly, redefining ownership to include different permutations such as collective ownership by multiple users of one property. There should also be more active participation from the banks, otherwise the whole home ownership scheme will fail.
Tweaking the RPGT, say, 5% after the 7th year, then reducing to 2% after the 9th year and maybe zero after the 10th year. The procedure for Malaysia My 2nd Home (MM2H) programme also has to be simpler and more efficient to encourage foreigners to come to stay which will help our property market, either through renting or selling.
Promote crowdfunding, rent-to-own (RTO) schemes, micro-housing and co-ownership. For example, micro-housing was piloted by Kuala Lumpur City Hall (DBKL) in early 2019 for youths in the B40 segment at Jalan Tuanku Abdul Rahman, and is also being explored for University of Malaya students in association with the Malaysian Institute of Architects (PAM).