KUALA LUMPUR – The government’s inclusion of timely and relevant measures addressing property gaps in its recent Short-Term Economic Recovery Package (ERP) or better known as PENJANA is commended by PropertyGuru, as much-needed catalysts for the market amid larger unemployment and recession woes.
The reintroduction of the Home Ownership Campaign (HOC), and revised Real Property Gains Tax (RPGT) and margins of financing for third housing loans onwards serve to shore up sentiment while unlocking pent-up demand, both crucial measures as the nation move towards a new norm under the Recovery Movement Control Order (RMCO).
“As Malaysia recovers from the COVID-19 crisis, we’re seeing increasingly gloomy macro indicators. Gross Domestic Product (GDP) projections have gone from 4.6% to -4.7% for 2020, with unemployment forecasts rising to 5.5%,” says Sheldon Fernandez, Country Manager, PropertyGuru Malaysia.
“This will naturally impact property, as many Malaysians defer home purchases while focusing on surviving day-to-day. However, the deficit spending approach taken in PENJANA is an established strategy in addressing potential recession trends, laying the foundation for a return to pre-COVID-19 levels for the market.”
Pre-crisis asking prices were on the uptrend, with the PropertyGuru Malaysia Property Market Index rising by 0.63% to 89.46 in Q1 2020, along with strong interest in the central region. In May, web traffic for properties priced RM501,000 to RM700,000, and RM701,00 to RM1 mil saw the highest increase, at 10.4% and 12.7% respectively.
Similar increases were seen in condominiums (23.5%), service residences (19.2%), 3.5-storey terraced homes (28.0%), and SOHO units (20.0%), indicating healthy demand for these property types as property bounces back post-crisis. However, search patterns moved away from the central region, with Johor (22.5%) and Penang (19.3%) as prime beneficiaries.
Property provisions in PENJANA serve to unlock this demand. The upward revision of 70% margin of financing limits for third housing loans onwards for RM600,000 properties and above is particularly timely, given potential interest among investors with financial leverage for strategic high-rise and terrace projects.
In addition, the RPGT exemption for disposal of up to three residential homes per individual till 31 December 2021 is a boon for sellers and upgraders, as well as those seeking emergency funds.
Citing a study of HOC 2019’s impact on the segment, property data analytics, and solutions provider PropertyAdvisor notes that the extension of the HOC’s stamp duty waiver to the sub-sale market may benefit first-time home buyers.
“Analysing the data, we found an increase of about 4% in first-time buyer activity within the sub-sale property market as a result of the campaign. This was likely due to increased marketing and media coverage of the property market in 2019, as headlined by HOC 2019 itself,” says Joe Hock Thor, CEO of MyProperty Data, operator of the PropertyAdvisor platform.
More than 60% of the sub-sale market in 2019 consisted of first-time buyers. Despite promotions largely centred on new project sales, Thor states that the HOC likely catalysed interest within the segment, leading them to seek potential bargains in the sub-sale market amid a favourable financing environment.
The financing environment has only improved in 2020, with interest rates at a historic low following a series of Overnight Policy Rate (OPR) cuts by Bank Negara Malaysia. However, larger economic issues have created instability in the job market, which may see increased demand for rental properties as home seekers play safe, placing upward pressure on rental prices in the long term.
“Clearly the signs are that we’re in a buyer’s market – but with so much uncertainty, we may not see demand returning to pre-COVID-19 levels among first-time buyers in the sub-sale market until at least Q4 2020. This would be accelerated if stamp duty waivers are extended to the sub-sale market,” says Thor.
He also believes that buyers looking to purchase a home at this current juncture might be greeted with better options, but that it is vital to undertake due research.