The race against time continues in finding a cure in the fight against Covid 19, so too the need to find a vaccine for an already badly beleaguered property market, plagued with past problems and further compounded by the pandemic
“Is The Housing and Property Sector At A Crossroad? Is The Worst Over Or Is It In A Crisis? What Next?” Bent on finding vaccine solutions for a property market in the doldrums, this was the main topic being discussed at the 2020 National Housing and Property Summit recently organised by KSI Strategic Institute for Asia Pacific and co-organised by the International Federation of Real Estate (FIABCI).
From addressing the root issue of low income, imbalance in supply and changing demands to addressing poor construction quality and a limited local population – vaccine solutions in government policies, stimulus packages and even a mindset swap are crucial. The need to readdress previous policies and non-intended negative consequences of improperly planned rural to urban workforce migration without proper job planning and housing considerations were also debated.
Tan Sri Michael Yeoh, President of KSI Strategic Institute for Asia Pacific asserts that should real estate, being linked with over 100 ancillary supporting industries decline, this will invariably impact the wider economy and other sectors. Hence, vaccine solutions are vital now.
Addressing solutions in the three “I’s” — “Innovation, Investment and Incentives”, real estate needs to embrace innovation in the virtual game plan of technology encompassing Artificial Intelligence (AI), big data, robotics and virtual apps, etc. New property technology he adds will impact the industry moving forward, which needs local business and foreign investments for property to be revitalised as a key sector and economic driver backed also by Government incentives.
“The three “S’s” of ‘Sustainability, Security and Smart’ cities are key. Sustainability in property is essential as buyers emphasise sustainable and clean environments. Security is important for people’s safety and increasingly, smart cities the world over are making city living more exciting.”
“The Government needs to ensure growth of the property sector so developers and buyers have sufficient access to funding and end financing, etc. The private sector needs faster approvals, less bureaucracies and absolute clarity plus consistency in policy formation and implementations to rebuild and reignite the country’s growth,” he elaborates.
Zuraida Kamaruddin, Minister of Housing and Local Government shares that now, “not only is profit affected, but also the current construction industry process due to the pandemic”.
“The Ministry of Works through its Construction Industry Development Board (CIDB) is involved in constructing, banking and monitoring the construction sector’s Standard Operating Procedures (SOPs), strategic enforcement and synergy. There has posed a dent in this sector as in order to contain the virus, workers’ testing and a relook at how things are done are required,” she reiterates.
What was once viewed as troublesome changes, has now become norm. Th extension of the Recovery Movement Control Order (RMCO) fortunately, has not undone the industry, she observes with 85% of projects being resumed in accordance to approximately 4,370 projects including 270 property projects.
“Over 7,590 construction sites have been inspected. Developers should stand with their workers in this test,” she reiterates, noting though disruption of the supply chain for raw materials is inevitable, the processes whereby materials are sourced from could provide fresh opportunities for export and a chance to better the market.
“The crisis has forced us to think-outof-the-box — to consider means and ways to reduce reliance on past forces. Though we have yet to see examples of this implemented in our work processes, solutions should align with adaptation to technology to provide and design tools, plus manage construction projects combined with strategic planning including the disruption of technology.
“The Government supports industries and private workers to encourage this industry to become 4.0 ready by implementing the working and maintenance of things during these trying times,” she affirms.
“Our buildings need to be designed to be Covid-19 proof. They cannot design without those rules which is special as substitute so developers need to explore how things are done,” she says of the future solutions which need to also account for construction costs and social distancing requirements.
The vaccine for Malaysia entails that the industry starts devising solutions for property, technology and innovation for both the public and private sectors to thrive. The Ministry is facilitating the Rent-To-Own (RTO) scheme in hopes that banks will eventually grant access for loans. It is managing big data to ascertain the right projects, types and housing prices to enhance for new developments.
“The new Covid-19 law proposed to Parliament is another booster for developers affected by the lockdown to give them some breather in granting leeway or exceptions linked to housing delivery.”
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Dato’ Eddin Syazlee Shith, Deputy Minister of Works advocates that developers send their workers for health screening.
“Covid-19 is a global pandemic with some countries faring better than others, with some foreign workers being affected. Developers must be vigilant in implementing SOPs. As workers live in shack conditions, if site mangers are not careful, they can impose danger for all workers and the Malaysian economy so those in the property sectors need to ensure safety for everyone. The pandemic has spread to other issues like the disruption of the supply chain leading to delays and bureaucratic processes in countries where these materials are sourced. This is the best time as any to enter the market for more innovative processes,” he states.
Developers need to implement 4.0 technology into the processes he asserts. “The main fear is of the unknown and cost is another factor. The construction sector as a key focus, has to adopt key work processes. The Ministry of Works though the Industrialised Building System (IBS) system, targets 80% of total projects with a 70% score by 2025.
“CIDB is finalising the 4.0 construction strategic plan to enforce technology in the industry to comply with the Internet of Things (IoT) in these trying times. Covid-19 has forced us to reconsider methods. If hygiene is to be ‘The New Normal’, then buildings have to be designed to be Covid-19 proof.
“The Ministry of Works supports the property industry in line with the Government’s aspiration to provide mobility and seamless connectivity, facilities and amenities. “Malaysia cannot rely on how it has operated in the past and expect things to be as previously. Hence, forums like today is highly important, to gather leaders who can share light into ideas and move the way forward.”
Dr Jayaselan Navaratnam, DirectorGeneral of the National Housing Department opines that there is no crisis as “people can still return to their homes”. The money value of time lost in travelling from the home though he considers as, a “crisis of living”.
Addressing the younger generation’s changing wants, he says “common wisdom” now lies in them wanting to travel, be mobile and seek opportunities, as they are now living in a time when they are exposed to both worlds so they are more predisposed to renting than buying property. “This reflects in transitions in organisations right now in what they can afford. This doesn’t mean Gen X or Y is better. It’s a matter of choice. Let people choose from what’s available in the secondary market which we have now which is consumer friendly,” he observes.
“All isn’t black-or-white as there are grey situations. Home ownership is a trade-off with household debt. There are things to consider in measuring affordability and ownership as real issues, coupled with the importance of social mobility. Affordability and development expenditure should accord meritocracy for the poor while proximity accounts for the money value of time lost which is a way of calculating cost of benefits,” he evaluates.
Price Income Ratio (PIR) is too simplistic as people also want social mobility, so it’s not only pricing but also an income issue. “You can live but not work nearby. Are we building schools near work places or homes? It’s also the affordability value. So, it’s not a crisis but a crisis of living. Are we honest about what we are asking for? Are we asking for personal or organisational benefit? Or, is it to benefit the nation? Help must reach the right people so we have to mix and match, and be pragmatic.”
“Household debt is high while the residential property sector accounts for over half of that.As policy makers, what is the emergency consideration? The secondary market sees transactions in market pricing as more interesting now. There’s also social mobility to be addressed for the poor and there’s a need to shift the discussion to rental scheme and what can be built for houses in the long run,” he shares.
Dr Suraya Ismail, Director of Research of Khazanah Research Institute questions if “home ownership or housing the nation is more important” — suggesting perhaps affordable housing could be done away with. Revisiting the structural issues of cities and towns in 1969 and 1970, she says the Government back then had encouraged rural to urban migration. However, there were not enough proper jobs and houses which unintentionally created a wage disparity and some being absorbed into government employment. “If cities create more jobs, people will have proper houses and jobs. Otherwise, houses created may not be decent.”
Questioning the difficulty of the private sector in giving decent housing to the M40, she says the Government, contrary to its responsibility, had to intervene because the private sector couldn’t deliver.
“Developers were buffered while Government policies created more issues. I think post pandemic is the time to revisit policies. The construction industry should eliminate shoddy workmanship as this would need maintenance. Because there are existing stock, all players should come together and realign their priorities to ensure that development strategies are realigned and recalibrated to give people really good products,” she opines.
Sr Michael Kong, President of the Association of Valuers, Property Managers, Estate Agents & Property Consultants in the Private Sector, Malaysia (PEPS) concurs with Suraya though he notes that there may not be enough political will to see it through.
Lillian Tay, Immediate Past President of the Malaysian Institute of Architects (PAM) says that the issue of ownership versus a change in people’s mindset with regards to housing is paramount. “There’s a percentage shift in mindset. It’s helping people to want better housing as opposed to everyone wanting to own a house,” she says. Architects she says, are often limited in terms of solutions and the use of IBS while overlooking in-costs covering housing production including overheads and utilities, etc.
“The disparity of zoning and planning have resulted in much long-term costs of owning property. There are many solutions but one issue relates to the quality of work being attributed to professional certified trusted standards. The whole construction process is very complex and dependent on foreign labour, dealing with spent in-training and promoting craftsmanship.
“We used to have pride in these kinds of craftsmanship work but we’ve now resorted to general labour,” she says calling for pride for workmanship to solve the dilemma of poor quality construction.
Datuk Koe Peng Kang, President of FIABCI Malaysian Chapter affirms that vaccine solutions for the property market is crucial but all isn’t lost, as “in every crisis, there’s opportunity” as reflected in the Asian Financial Crisis of 1997 and 1986.
“From each crisis, there will be a new birth of multi-millionaires or billionaires, so there’s still potential. We mustn’t look at developers as always being very rich as they have to borrow lots of money to stimulate the economy. Simultaneously, people who bought low cost apartments have, over 30 years, sold them off at huge profits as prices have increased. Selangor has taken very positive steps in creating that balance,” he says.
“I’m sometimes confused because property prices are said to be very high but when we talk to foreigners, our properties are positioned as competitively priced and the lowest in the region. The key issue is people’s income levels which make them unable to afford buying properties because if they earn such low income, how do they save for the deposit Banks should look at the margin and review their policies and consider potential. What’s wrong with a 95% loan disbursement?
“I think it’s the right time to invest in good properties. Many purchasers who buy at a low including house buyers have made more money overall as compared to developers who made approimately 25% in profits. When prices decline — at the point of low demand, prices will increase. If you look at 1997 and 1986, many said property prices were not good but many who bought at that time at a low, profited. Income levels he highlights, have not rise while banks assess prospective buyers at the time of loan application instead of reviewing their policies.
“The moral is to invest when prices are low and watch the timing. While considering supply and demand in Malaysia, are we at the right cycle in an environment where banks offer this margin of financing not only for local buyers but also for foreign investors?” he asks.
“The crisis in Malaysia is very high. But, the question is more about strategy. Opportunity time like this is when sellers are willing to consider offers. Developers are now prepared to listen to offers and bargain hunt. The strategy now is likely to buy and lease back. Now presents a great opportunity for investors wanting to purchase property in any form.
“The ringgit will probably strengthen in 2021. We have the Straits of Melaka which has the trade ply going by so we should be optimistic. Humans are resilient and we can recover from crisis. The Government should complement the Malaysia My Second Home (MM2H) initiative and have the stimulus package to kickstart theeconomy. It’s happened in 1997 so there’s nothing wrong with it happening again in 2020. There’s preparation job needed.”
“With only have a 22 million population, so a balance of high-end products is crucial. Students spend their parents’ money overseas in London and Melbourne, so Malaysia needs to create a right environment like this for spending to occur. MM2H in 2018 attracted spending from car rentals, insurance and over 6,000 sectors which created a new industry.
“We have to attract the right types of investors. If they think the education here is good, we need to also attract them to spend in order to stimulate the economy by creating the right environment. Malaysia’s demand is limited. Before Covid-19, Malaysians were comfortable so they didn’t want to grow or go out but for the ambitious, China has a 1.4 billion population so there’s plenty of opportunities to do business there.”
Sr Foo Gee Jen, Group Managing Director, CBRE/WTW opines that he is “optimistic about the market at any one point in time”.
“Today, we are having low regime in borrowings at below 2% which is good so developers or buyers may be willing to hold their properties longer. That will lessen pressure on the pocket so it represents opportunities to buy during this crisis for investors, big players or housebuyers. There’s opportunity now as many assets which previously were not available are suddenly available like fivestar hotels in certain areas. Sellers now are more reasonable in terms of pricing and are prepared to accept offers. It’s no longer herd instinct but looking at appreciation rate which is yield-driven.
“Rental markets today need to be revisited. We have to reassess the market concerning appreciation play. Even though we are in Covid-19, we’re fortunate that the property market has been walking like a crab since 2014. Even with this pandemic, I don’t foresee a hard landing. If at all, it’ll be a very soft landing, especially with the residential market which dominates over 55% of the entire market which is the biggest component figure of the market. We have been growing sideway since 2014 so it’s very moderate. If we look at the long-term rate, in the last 15 years, it’s still growing at a rate of about 5.5%. That has been good while the growth of the salary rate is at 4.5% so, the salary gap is not too wide. With the pandemic, this will likely decline to 4%.”
To him, the issue is whether properties are overpriced or are we looking at the other side of the coin whereby income is not increasing enough. “Are we blaming one sector of the market? Are developers overpricing and charging too high or is there not enough political will to push income levels higher to enable people to afford housing? We should forget about low cost housing if we are pushing for a high growth economy and gone should be the days where 40sqm of space is built for a family of six. To me, it’s still a very good time to buy as compared to the previous two financial crises,” he reasons.
Tan Sri Lee Kim Yew of Country Heights Holdings Bhd opines that Malaysia should promote the country to China and not wait until the lifting of the travel advisory by having preparatory and pipeline works in place. This though, should be limited “only to quality qualified Chinese investors” to help generate consumption towards the improvement of the domestic economy.
“Making money is a long-term investment, so you hold and then sell. Covid-19 provides opportunities for long-term investments. Nowadays, you need a very innovative investment strategy in order to sell while providing golden opportunities,” he adds advising developers to plan for the long-term and not to be overly speculative, with big data and Artificial Intelligence (AI) being key drivers. While global economies are on a standstill, he affirms that only China has managed to get back on its feet, looking at its economic activities and sudden Small and Mediumsized Enterprises (SME) growth spurt after the lockdown. His views were echoed by Shan Saeed, Global Chief Economist of Juwai IQI Holdings who anticipates that the Yuan will make a big comeback and See Kok Loong, Executive Director of Metro Homes Realty Bhd who is all for MM2H being enhanced.
Providing an alternative solution to what is perceived to be a scarcity of urban land, Ishmael Ho, Chief Executive Officer of Ho Chin Soon Research Sdn Bhd says that location is key, so proximity to economic areas is paramount. His controversial but pragmatic proposal from a map planner viewpoint lies with unlocking the potential of Malay reserve and Army Camp land to monetarise designated lands for urban regeneration.
As the concept of Work From Home (WFH) picks up, Poo Ching Loong, Chief Executive Officer of YesBoss Corporation, who has been involved in real estate for 23 years now, stresses evaluating technology and adaptability, while emphasising the importance of data – highlighting how China is now a cashless society instead of adopting credit cards.
“Real estate is similar in that it will transform and use technology. Internet Technology (IT) can contribute to real estate technology in Malaysia. Real estate will be the next wave if we start this off in Malaysia which will contribute to its Gross Domestic Product (GDP) growth.
“The first concept is data, and the second lies in combining it. We’re talking about titles and capturing all this information. Real estate technology is similar so it’s whether you want to move forward or not. The basic fundamentals of real estate will still be there but a mindset transformation is needed as real estate with technology will be the next wave moving forward.”
Lim Boon Ping, President of the Malaysian Institute of Estate Agents (MIEA) says there has been a mushrooming of property portals during lockdown but not all are credible. Hence, the association has made this available on a co-agency platform as the way forward.
Addressing the crowd, David Mishan Hashim, Founder of VERITAS Design Group advocates “Resilience in Design”.
“Over the last six months, the doctrine of sustainability has proven to be inadequate to address the challenges wrought upon users of buildings, public places and cities by Covid 19. Platinum ratings and green building certifications didn’t reduce the discomfort and hardships suffered by society caused by lockdowns and social distancing measures. There’s more that architects and urban planners can do to enhance the well-being of society during disasters such as the pandemic, and future calamities in the future.
“Resilience planning and design is a new area of study which incorporates but extends beyond sustainability to anticipate hazards, both natural/ environmental and human/societal which humanity will increasingly be forced to confront. While it is a novel formulation outside of the US where it was developed, it has already evolved into a useful tool to assist architects, urban planners and policy advocates to design and plan more resilient buildings, public places and cities for the future,” he affirms.
Georg Chmiel, Executive Chairman of Juwai IQI Holdings acknowledges that there is disruption in the property market, with “technology trends taking place”.
“Technology is pushing progress but changes in society externally drive trends. Microsoft underwent more technology changes in the last two months than in the last two years. Disruption is really about solving problems in the real world and making things easy via technology,” he asserts.
He notes that after the Wall Street Crash of 1929, solving problems with technology was key. Now though, it’s about transparency and deriving data to make the next data transactions easier and more attractive.
“One buys property for appreciation in value. People were saying that technology may replace property sales. I doubt it as technology generates leads for real estate agents to follow up on. Developers want to see how data is derived while the next property sale will be easier to manage via technology. Real estate agencies will not be replaced with technology. It’s not one or the other but using technology as the driver in solving real estate problems especially in the subsale market in generating leads, making the search easier and addressing new business problems. The biggest road block is people wanting to buy but not getting loans from banks and about how data is derived and how the property will be easier to manage.”
Datuk Stewart LaBrooy, Chairman of Alpha REIT Managers, in addressing changes in “The New Normal”, challenged the normal way of thinking in how the market has changed throughout the decades and where it is now headed. “Covid-19 has changed the entire landscape and the course of our lives possibly for the next two years as I don’t see it disappearing. There are things driving change now so real estate players have to be prepared and examine their strategies.
“‘The New Normal’ will move away from free to privatised trade. Those in real estate must be prepared as this is important. Those who never used e-commerce before are now addicted. In the first three months of lockdown, sales of online purchase of vegetables and meat increased by approximately 40%.
“E-learning took over with Zoom and suddenly, people forced to adapt. Webinars too had much wider audiences — probably thousands looking into that. You can reach far larger audiences at lesser cost. Kids were learning online but schools were not prepared. But, consumers will remain cautious far long after the virus is gone. By centralising, China was well managed. Whatever said and done – global supply will exceed demand. We have to change the way we do things. Even in buying cars, FinTech is taking off and younger players are showing banks that if they don’t embrace FinTech, they will go out of business. Mobile banking is becoming the norm and people don’t carry wallets anymore. Real estate agents are all signing everything online so one has to embrace technology as to not be left behind. Malaysia’s GDP dropped some 17% in the second quarter as compared to the second quarter of the 1997 Crisis whereby the GDP dropped by some 7%.
“E-learning took over with Zoom and suddenly, people forced to adapt. Webinars too had much wider audiences — probably thousands looking into that. You can reach far larger audiences at lesser cost. Kids were learning online but schools were not prepared. But, consumers will remain cautious far long after the virus is gone. By centralising, China was well managed. Whatever said and done – global supply will exceed demand. We have to change the way we do things. Even in buying cars, FinTech is taking off and younger players are showing banks that if they don’t embrace FinTech, they will go out of business. Mobile banking is becoming the norm and people don’t carry wallets anymore. Real estate agents are all signing everything online so one has to embrace technology as to not be left behind. Malaysia’s GDP dropped some 17% in the second quarter as compared to the second quarter of the 1997 Crisis whereby the GDP dropped by some 7%.
He opines that “very large organisations” will have the potential to grow. “That’s the future — unless we can grow the market by distribution. The property industry will come back but it will be very different. As far as the industry goes – it is booming but this is so for those who can provide 30-area sites for businesses to be relocated.
“I’m excited about the industry because it is now technology led. We will get jobs in for people to be able to buy properties. Although the economy’s contraction has been some 17.2% – the worse in its history we think it’s going to come back. I don’t think it will be a V shape but L shape recovery in comparison to the 1997/1998 crisis where it took five years to recover.”
Reiterating the need to open up to foreign investments, the entire industry space is an exciting place to be he says. “We have a large manufacturing base and are looking at creating a greater eco-system to support this. But what we lack in the industrial segment which the Federal and State governments didn’t look at are ‘still very fractured and small’ so there is a need to identify large tracts of land to expand businesses.” he adds.
Humans still need to meet, interact and be together, maintains Sarkunan Subramaniam, Managing Director of Knight Frank Malaysia and he questions if the “New Normal” is permanent.
“Things are certainly changing but it’ s whether they are changing for the long run. One thing’s for sure – companies are not making decisions for the longterm. Most lease agreements now are short-term because everyone is uncertain and wondering what will happen next – pushing the direction towards technology and discovery.
Technology is the way. “Working from home is going to be a long-term trend because of Covid-19. The office will be more of a collaborative space,” he says of “The New Norm” with social distancing bringing changes with agents now renting out sub spaces. Also, 90% of the people have chosen the loan moratorium. But once you take this, the bankers will assume you are in trouble and you have to prove your case. Bank Negara Malaysia reports that out of its 2 million survey of which 1.1 mil people responded, 330,000 people sought additional moratorium so potentially, loans are defaulting. We don’t foresee many auctions coming immediately but after Chinese New Year,” he says.
The earlier proposed Vacancy Tax he opines doesn’t make sense as most unsold units belong to Government agencies. This tax was introduced overseas to ensure people rent out properties. “We don’t have a demand problem but an issue of supply. I’m talking about demand in housing income and the basic problem is that the economy isn’t growing at the pace it should, with the property market having drastically slowed down.
“The property market here is very sectorial. The values of commercial estate is not under pressure to go down. Owners are trying to hold on to their assets and buyers are looking at the best prices. But, the commercial real estate office sector will drop and industrial values will do well and in fact, has gone up as people are willing to invest in logistics. But, housing prices are just hovering,” he sums.
Though he doesn’t think the worst is here yet, with January and February running into turbulent times, he is more optimistic after Chinese New Year. “When the borders open up, new changes will come back to what it was while resort hotel values are going to shoot up again.”
Previndran Dato’ Singhe, Chief Executive Officer of Zerin Properties says those who thrive by adapting the fastest will be the survivors of this pandemic.
“Occupancy has been consistently dropping, and I foresee it going lower. WFH will impact the office space and market so the future trend may cater to physical distancing. The retail market is a tough challenge for retail asset owners if they can’t attract footfall. Some malls are operating online which is the way to go. Industrial requirements demand a certain minimum size with distribution hubs but much has changed in what people want,” he concludes.
*Information and opinions expressed in this issue are accurate at the time of print.