The COVID-19 pandemic has wreaked havoc in the already muted real estate market. We summarise roundups for 2020 and what market trends to expect in 2021.
2020 will go down as an unprecedented year as countries around the world are faced with a global pandemic. Malaysia is no different as the Movement Control Order (MCO) and travel restrictions have adversely affected an already dampened market.
According to the National Property and Information Centre (NAPIC), the property market contracted sharply in March and April due to the implementation of the MCO before picking up again in May as restrictions were eased during the Conditional Movement Control Order (CMCO) period.
Here are the highlights for 2020:
1. Steep decline in the volume of property transaction across the board
NAPIC’s first half of 2020 data showed that the volume of property transaction declined 27.9% with 115,476 units compared to 160,165 units during the same period last year. Out of this, 75,318 units were those in the residential property sector which recorded a decline of 24.6%.
The steepest decline was recorded in the commercial property sector which saw a 37.4% drop followed by the industrial, agricultural and development land and others at 36.9%t, 32.8 per cent and 28.6% respectively.
It is hardly surprising that the Bank Negara Malaysia revised the Overnight Policy Rate (OPR) four times in 2020 itself to bring down interest rates in order to encourage consumer spending and to facilitate the application of new loans.
2. Residential overhang continued to increase
The COVID-19 pandemic has seen the oversupply situation in the residential property sector worsening.
According to data from NAPIC, there was a 3.3% (31,661 units) increase in the overhang in residential properties. Out of this, 31.7% are priced below RM300,000. 53.2% comprises high-rise units followed by landed terraced homes (29%), semi-detached & detached (12.4%), low-cost housing (1.6%) and others (3.8%).
High rise units within the price range of RM500,000 to RM700,000 form the bulk of the unsold inventory at 4,144 units. Johor had the highest overhang at 19.5% followed by Selangor at 16.4%.
Meanwhile, serviced apartments (which is classified as commercial property by NAPIC) recorded a 26.5% or 21,683 units increase in overhang. 61.8% are priced above RM700,000. A whopping 73.7% are located in Johor followed by 11.6% in Kuala Lumpur.
3. Majority of new launches were in the mass market segment
Despite the muted property market, developers continued to launch projects, particularly in the mass market segment. NAPIC’s data showed that 13,294 units of new launches were recorded in the first half of 2020. Of this, 50.1% are priced below RM300,000 while 33.7% are priced between RM300,000 to RM500,000.
Landed properties dominate new launches making up 69.7% of the figure while the remaining 30.3% are stratified properties.
Negeri Sembilan recorded the most launches in the entire country during the period with 2,797 units. This was not surprising as properties that are located away from Kuala Lumpur and Greater Kuala Lumpur are more affordably priced for local home buyers.
4. Steep decline in office and shopping centre occupancy rates
The MCO had a detrimental effect on office and shopping centre occupancy as many Malaysians are forced to work from home. Private office building saw their occupancy rate plunging to 74.3% with only 12.70 sq m of space occupied out of the total 17.09 sq m.
Meanwhile, shopping centres experienced the most decline at 76.7% occupancy rate. Only 9.62 sq m of space was occupied out of the total 12.55 sq m.
5. Malaysian House Price Index records first-ever decline, corrected slightly in Q2 2020
The mismatch between what Malaysians can afford versus what is being offered in the market, combined with the pandemic has further worsened the overhang situation resulting in an extremely muted year for developers.
According to data from NAPIC, the Malaysian House Price Index stood at 198.3 percentage point in Q2 2020 after hitting a peak of 199.7 percentage point in Q12020 – the 0.7% decline is the first-ever one recorded since 2010.
Nevertheless, when compared to Q1 2010 (97.25), the price index recorded an increase of 102.5 to reach 199.7 percentage point during the same period in 2020. This suggests house prices across Malaysia have been skyrocketing over the past 10 years before moderating slightly in the second quarter of 2020.