LONG before the COVID-19 pandemic affected economic sectors in Malaysia, the local property market was already in stagnation. From 2015 to 2017, property transaction volume and value had declined (although there was a marginal increase in 2018).
In 2019 and 2020, analysts and experts forecasted there will be not much improvement in the property market and it will remain flattish. The slowdown is due to affordability issues, slower economic growth and property overhang.
In addition, the situation was exacerbated by the COVID-19 pandemic that brought Malaysia’s gross development product (GDP) growth into negative territory. Also, the movement control order (MCO) also contributed to a decrease in number of home seekers and delayed property listings.
Will the property market recover in 2021?
RHB Investment Bank Bhd forecasts that there will be a relatively stronger rebound in 2021 GDP growth of +6.3% vs -5.5% in 2020. The research house also expects property sales to only grow by 10% year-on-year (yoy) in 2021.
In the recent years, growth in the property sector appears to have a lower correlation with Malaysia’s GDP growth. RHB attributes this to the interruptions from the supply glut as well as policy interventions since 2014, when the Government imposed a slew of cooling measures.
“Due to the COVID-19 pandemic and the lockdown in 2Q20, we estimate that aggregate property sales in 2020 will dip by roughly 20-25%, pending the release of 4Q20 results in February,” RHB said in a report.
Despite property sales picking up strongly post lockdown in 3Q20 (+61% quarter-on-quarter [qoq] and +4% yoy), sales momentum is expected to taper off in 4Q20 as the number of new COVID-19 cases surged since end-Sep 2020, and has sustained at high levels (above 1,000 per day) until now.
Although developers have yet to provide guidance for their property sales target for 2021, the research house are less bearish on the property market outlook, but expect only a mild recovery ahead.
“Property sales should grow by about 10% yoy from a low base in 2020, assuming there will be no repeat of a nationwide lockdown. Given the positive developments on vaccines and the market’s expectation of their availability in 2H21, we believe economic growth will gradually pick up,” RHB added.
Having said that, low interest rates and economic stimulus plans are expected to help support demand for property to a certain extent. Nevertheless, the sporadic resurgence of COVID-19 infections and partial lockdowns may still happen – which would dampen buyer sentiment from time to time.
“In the event of an MCO 2.0 for a duration of 2-3 months again, we believe property sales may plunge possibly by about 10% this year.” – Jan 10, 2020
