By Sharina Ahmad
THERE are mixed opinions about Malaysia’s economic growth and the property market in 2020. Many experts think there will be a turnaround though not exactly a stellar year for the housing market.
In general, if the country’s economy improves, it would translate into a healthier real estate market.
It is anticipated that there will be a gradual improvement in the property market in 2020. Demand and prices for property will remain flat because of market sentiment but selected prime and strategic areas will still attract investors.
Overall, the property market will continue to pose some challenges but it is better positioned to perform well in the coming years.
But that’s assuming the experts’ forecasts are right.
More opportunities in auction market
Nawawi Tie Leung Real Estate Consultants Sdn Bhd investment executive director Brian Koh says this year will likely see increased opportunities for bargain hunting, flowing through from the previous two years.
“There continues to be more properties coming for auction, as well as more realistic pricing in the secondary market as well as discounts for developers’ completed stock.
“So, for buyers seeking to buy for own occupation, this will be the right time to seek options in the market. For investors with a longer-term view, given the current external uncertainties, they can afford to wait a bit more, biding their time to seek better bargains,” he tells FocusM.
According to AuctionGuru.com.my’s 9M2019 Auction Report, a total of 26,563 properties worth RM14.3 bil went under the hammer during the period, an increase of 12% from 23,658 properties valued at RM10.9 bil (32% rise in terms of value) in 9M2018.
The increase is due to the oversupply situation in the property market which has reflected in the foreclosure market. There has been a significant increase in the number of properties put up for auction in the first three quarters of the year – a sign that property owners are losing their holding power.
In the third quarter of 2019, there were a total of 9,294 foreclosure properties, compared with 8,760 cases in 3Q2018.
The online auction listing platform’s executive director Gary Chia has observed that the number of auction properties has been increasing since 2016 with more high-value properties and land going under the hammer.
The online portal revealed that in 9M2019, there were 3,316 commercial properties (12% of 26,563 auction properties in 9M2019) and 1,051 land plots (4%) for auction.
The 3,316 foreclosure commercial properties had a total reserve value of RM4.26 bil, an increase of 27% in volume and 62% in value compared with 9M2018.
Auction residential property in 9M2019 was valued at RM8.5 bil or 59%, while the value of auction land assets totalled RM1.6 bil or 11% of the total reservation value.
Sales volume and value improve
Rahim & Co International Sdn Bhd real estate CEO Siva Shanker says 2020 is a good year to buy a house since the market has shown some improvement since last year.
“This year is a good time to buy a house. It was even better to buy in 2018 and 2019. Last year we saw some improvement in property sales volume and value. For this year we can expect a slight increase.
“Buyers can buy a good property at a better price, and on better terms and conditions,” he says.
This is based on a report published by Edmund Tie & Company (SEA) Pte Ltd, which saw a small quarter-to-quarter price increase for high-end condominiums in Kuala Lumpur during the second quarter of 2018. Rents, on the other hand, declined by 6.3%.
However, 2019 has shown more positive results than expected and the residential property market has picked up. It even recorded a higher value of transactions by September 2019 compared to the whole of 2018 for the primary market.
Siva adds that Malaysia’s property market has been in decline since 2012. “Even if prices still rise, we’ve seen modest increases in the past five years.
“In 2017, prices increased by 5% on average, the lowest rate since 2009. We see a similar trend in the number of transactions, where we only had 311,824 transactions in 2017, a record low since 2012,” he says.
Siva seconds the Home Ownership Campaign (HOC) 2019 which was launched in January 2019. It has cleared 31,415 residential units worth some RM23.2 bil, surpassing the initial target of RM17 bil. But he adds: “HOC is not going to be extended. Although the campaign is good, but we cannot have the subsidy mentality for the rest of our life.”
Housing and Local Government Minister Zuraida Kamaruddin launched the programme for residential units developed by federal and state governments, and private builders.
The HOC, which also provided ancillary support and services including financing schemes and legal assistance for property buyers, was designed to alleviate the RM20 bil overhang in the sluggish residential property market.
Under the scheme, which was also supported by various home exhibitions throughout the nation, houses with HOC certificate also enjoyed various stamp duty exemptions and discounts.
During the campaign period, participating developers were also told to sell their houses with a minimum discount of 10%.
Sunway Bhd property division managing director Sarena Cheah says there will be many offers this year for purchasers who want to grab the opportunity to own their own homes at competitive prices, as well as to take advantage of good packages from developers who will be looking to incentivise home ownership.
“For example, Sunway Property will be carrying out a home ownership campaign, “Yours, 2020” which will help the people own their dream homes, at the right price and a strategic location, coupled with the right financing support.
“The home packages we are providing will also be customised to centre on well-being with personalised financing options,” Cheah says.
LBS Bina Group Bhd managing director Tan Sri Lim Hock San says the market is anticipating another cut in the overnight policy rate (OPR) this year, which bodes well for property developers’ housing sales.
There is a possibility of the benchmark interest rate being reduced further from 3% to 2.75%.
‘There might be no improvement’
However, Ernest Cheong PTL Chartered Surveyors consultant and senior partner Dr Ernest Cheong said the industry might see no improvement this year.
“Will 2020 be a good year to buy a house, my sincere answer is an emphatical ‘no’.
“With the Malaysian and global economy heading into, if not already in recession, it would be suicidal for anyone to buy a house now and commit to 30 years’ slavery to the banks,” he tells FocusM.
He opines that one of the main reasons for this is that consumers (namely Malaysian families) are heavily in debt, up to 80-90% of their incomes.
According to Bank Negara Malaysia (BNM), high property prices continue to put a heavy burden on the lower-income group, placing home owners with high mortgages among the most vulnerable to potential financial shocks.
The central bank’s half-year financial stability review last year said while the share of household debt held by borrowers earning less than RM3,000 per month has declined, the leverage of these borrowers has, however, risen steadily.
This was driven by housing loans that have been made more accessible under various loan assistance schemes introduced in recent years.
The overall household debt level continued to rise, with housing loans remaining the key driver of debt growth. BNM said the overall household debt level remained elevated at 82.2% of gross domestic product (GDP).
“Many Malaysians are at risk of being made bankrupt because they could not pay their housing loans, business loans and credit card loans.
“They (Malaysian families) are spending more than they earn and have no more spare money to pay for a housing loan,” says Cheong.
He says with inflation pushing up the cost of living, families will find it more and more difficult to find enough money to pay for their daily necessities.
“Please tell me how these Malaysian families can afford to buy houses. This is a dream for 95% of families.
“This will remain a dream for the next 15 to 20 years, similar to Japan, Taiwan and Hong Kong,” he opines.
Uncertainty in Malaysia’s economic situation
Knight Frank’s Real Estate Highlights report for the second half of 2019 says the Malaysian economy expanded at a slower pace of 4.4% in 3Q19 (2Q19: 4.9%), impacted by the ongoing trade tensions and heightened global uncertainty.
Economic growth continued to be underpinned by both private consumption and government spending as well as support from the services and manufacturing sectors.
For the whole of 2019, GDP growth is forecast to range from 4.3% to 4.8%. Headline inflation was higher for the third quarter at 1.3% (2018: 0.7%) due to the lapse in the impact of GST zerorisation.
Labour market conditions remained supportive with the unemployment rate holding steady at 3.3% in 3Q19.
On the lending front, BNM maintained the OPR at 3.0% so as to remain accommodative and supportive of economic activity. The central bank, however, cut the Statutory Reserve Requirement (SRR) ratio from 3.5% to 3.0% to ensure sufficient liquidity in the domestic financial system.
The report said for supply and demand, the cumulative supply of high-end condominiums/residences stood at 59,358 units as of 2H19 following the completion of five projects with a total of 2,572 units.
Three of the projects are located in KL City, namely Tower 1 @ Star Residences (557 units), Aria KLCC (598 units) and Stonor 3 (400 units) while Novum Bangsar and Sunway Mont Residences on the city fringe contributed 729 and 288 units respectively.
Another 11 projects are scheduled for completion by the first half of 2020. Collectively, they will add 6,151 units to the cumulative stock. They are Tower 2 @ Star Residences (482 units), 8 Kia Peng (442 units), Sky Suites (986 units), The Manor (212 units), Novo Ampang (421 units), 18 Madge (50 units), The Estate (328 units), Agile Mont’ Kiara (813 units), Arte Mont’ Kiara (1,707 units), TWY Mont’ Kiara (484 units) and One Kiara (226 units).
The survey reported that in KL City, the pricing for newly launched projects such as Core Residence and Conlay exceeds the RM2,000 per sq ft mark.
The gross selling price for Core Residence, which is located within the TRX precinct, averages RM2,200 per sq ft while for Conlay, it is in the region of RM2,050 per sq ft.
The newly launched Agile Embassy Garden at Embassy Row has set a new benchmark pricing of RM1,900 per sq ft (gross) for the exclusive locality of Ampang Hilir/U-Thant, In comparison, Impression U-Thant was launched in 2018 at a gross pricing of RM1,700 per sq ft. – March 6, 2020