Experts pan property mart fire sale on back of economic rebound

Malaysia’s residential property market, which has weathered multiple cooling measures and an economic slowdown, may see prices tumbling down in the wake of the Covid-19 pandemic.

Prices are expected to dip further by the end of this year due to the weak demand and poor economic outlook. 

However, buyers who are looking for fire sales will be disappointed, as experts said prices are unlikely to crash the way they did in the recession after the global financial crisis in 2009.

This is because experts predict that the economy will bounce back in 18 months.

Premier Asia Property Sdn Bhd managing director Kee Wah Soong said the property market is not on a fire sale at the moment as the government has come out with a six-month relief measures which will enable them to defer their loan payments to banks, over that period of time. 

“Prices are expected to trend lower after the moratorium period ends. However, the housing prices will not plummet as what had happened during the global financial crisis, when overall property prices fell by 24.9% over four consecutive quarters,” he told FocusM.

Kee said during the moratorium period, home buyers have the chance to plan their instalment payment and some are not desperate to sell their property. “At this time, the seller/developers will not lower the prices if they are able to sell it with a higher price before the moratorium period ends,” he said.

However, Kee said there is a downward bias after the moratorium is lifted as sellers find difficulties in servicing their loans, and those who have more than two houses might seek to dispose of one to ease their cash flow. 

“Before banks start to see an uptick in non-performing loans (NPL) as borrowers start to default their loans for more than three months, those (homeowners) who have financial difficulties are willing to sell their homes at a cheaper price,” he said.

Other factors that lead to a further dip in housing prices, according to Kee, is when banks start recognising loans as NPLs. It is also expected that there will be massive auction sales available by the end of this year. 

“The NPL process will usually take three to six months where it involves the auctioneer, lawyers and so on. For every auction, if there is no bidder, the reserve price would come down by 10%. Just imagine if there is no bidder for eight times,” he said.

Metro Homes Realty Bhd executive director See Kok Loong said fire sales have yet to come but sellers are more willing to listen to offers now. 

“I believe it has very much to do with the six-month loan moratorium. A lot of commercial shop owners contact us because tenants vacate their place during the movement control order (MCO) or decide to close down the shops. Fire sales should come from September till December 2020.”

For now, See said there will be slight offerings for the property due to the MCO as people will not go out or are not confident to have viewings. 

Current hotspots, added See, were still traditional areas like Damansara, Mont’ Kiara and Taman Desa.

According to him, some sellers might want to sell their homes, but it depends on individual financial capability. “Those with less commitment would not sell anymore because of the low price offer. For those directly affected industries like tourism-related and the entertainment industry will push to sell their assets for work capital and so on,” See said.

Moving forward, See foresees that developers will launch small units and affordable units in the next two years. 

He advised the normal sellers who have the financial capability to hold on to their property during the pandemic period as property in the long term would definitely recover, as it is a basic “need”.

Ernest Cheong from Ernest Cheong PTL Chartered Surveyors said Malaysia’s current economic situation had dragged the property industry into a challenging situation. 

“We expect the property prices to fall within the next 12 months. Due to weakening demand caused by people’s lack of financial resources, we foresee demand from the property market in 2020 to be weak and flat. 

“We do not expect the industry to recover before the Malaysian economy’s recovery. We advise home buyers to be cautious before they commit to long-term financial responsibilities in light of an uncertain future.” – May 20, 2020

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