THE much-anticipated rollout of the COVID-19 vaccine (expected to begin in 1H 2021), is predicted to boost the rate of Malaysia’s economic recovery and lift the overall consumer sentiment for the country’s property sector, said a property expert.
However, according to Knight Frank Malaysia managing director Sarkunan Subramaniam, the current ongoing political uncertainties amid the worsening COVID-19 crisis might cause property buyers and developers to rethink their future plans and strategies.
“The performance of the residential market is very much dependent on how the economy moves forward,” he said.
In a recent report by Knight Frank Malaysia entitled Real Estate Highlights 2nd Half of 2020 that was released earlier today, it showed that the performance of the residential market is expected to remain challenging in the first half of 2021.
The report showed that the residential market was experiencing slight recovery post movement control order (MCO) as developers reported improved bookings thanks to the low interest rate environment, pent-up demand, the reintroduction of the home ownership campaign (HOC) and the initiatives under the stimulus packages as well as Budget 2021.
However, the recent spike of COVID-19 cases and the reimplementation of MCO will likely derail market recovery in the short term.
The retail and hospitality industries will also continue to face disruptions and challenges, considering the measures taken to flatten the COVID-19 curve of various phases of MCO, travel restrictions and closures of international borders.
Such measures are bound to severely impact both industries, resulting in temporary or even permanent closures of selected retail outlets and hotels nationwide.
“The third wave of COVID-19 infections have weakened the recovery momentum of the retail industry. Occupancies and rents for the retail sector are expected to decline moderately in the coming year,” said Knight Frank Malaysia’s deputy managing director Keith Ooi.
“However, we anticipate that values of prime grade retail assets should remain relatively stable despite the rental decline,” he added.
Meanwhile, Knight Frank Malaysia executive director of capital markets James Buckley believes that once the COVID-19 vaccines have been rolled out and borders reopen, international tourists will slowly begin to return in 2H 2021.
“Although it may take some time to recover to pre-pandemic levels, investors who are confident in their analysis will recognise the market cycle and see this period as an opportunity to acquire quality prime assets, which will retain value,” said Buckley.
As for office space, the report showed that demand has weakened as companies review or postpone their real estate decisions to balance out growth while also maintaining operational and cost-efficiency.
Regardless, it is expected that the workplace trend will shift to have a more virtual nature in the future.
“Organisations that have been adopting hybrid working model since the start of MCO may find this model beneficial and consider it as a go-to model moving forward. The office space function may change to support this arrangement by providing a ground for physical interaction and collaboration among the employees when required,” said Knight Frank Malaysia executive director of corporate services Teh Young Khean.
On this, Buckley noted that the current economic climate caused investors to shy away from buying second-hand office spaces, making it hard for such spaces to compete with newer units.
This will cause the price of older office buildings to soften and some of them may need to be repurposed into other uses.
Despite that, there is still hope for Malaysia as the report showed that the office sector occupancy in Penang seemed to remain strong amid the pandemic.
In George Town alone, the average occupancy rate for four prime buildings stayed at 89%, while the average occupancy rate throughout the whole state held steady at 78.2% as of 3Q 2020.
According to Knight Frank Penang executive director Mark Saw, the state is currently the second most attractive location in Malaysia for MSC companies to set up shop, aside from Klang Valley. – Jan 20, 2021
