Property market expected to rebound in 2022

KUALA LUMPUR (July 28): Property transactions are expected to surge although prices will remain flattish in 2022, said property experts at the 2021 Malaysian Housing and Property Summit with the theme “Resetting and rebuilding the housing and property industry in the new normal” organised by KSI and FIABCI Malaysia yesterday. 

In the session titled “Strategic outlook and trends in the property sector”, the panellists were optimistic about the market outlook in 2022. 

The panellists were CBRE I WTW group managing director Foo Gee Jen, Zerin Properties managing director and chief executive officer (CEO) Previndran Singhe, and Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector (PEPS) president Michael Kong. Rahim & Co International CEO of real estate agency Siva Shanker moderated the session. 

PEP’s Kong said that when the nation went into a full-blown lockdown on March 18 to May 3, 2020, the market was healthy at 72,867 transactions worth RM28.5 billion. However, the whole of the second quarter of 2020 (2Q20) was muted (recording a drop of 41.1% to 42,609 sales at RM18.35 billion). 

He noted that the market recovered some lost grounds with healthy transaction values and volumes during the conditional movement control order (CMCO) and recovery movement control order (RMCO) from May to December last year. However, the recovery was hampered by the MCO 3.0 and full movement control order (FMCO) this year. 

“The 1Q21 results were impacted, but [it is] interesting to note that the numbers were slightly better than 1Q20. This was possibly due to spillover effects from 4Q20. Perhaps we need to look at the performance in 2Q21 to judge further,” said Kong.

Kong predicted that the 2Q21 figures will dip due to the strict lockdown imposed. He expects the pandemic to be under control by year end (with the vaccination programme in full force), and the market should see a robust recovery in 2022.

Kong also called for the reactivation of the Malaysia My Second Home (MM2H) programme, which was temporarily suspended in the middle of last year. The Ministry of Tourism, Arts and Culture has announced the completion of the review of the programme and that it is ready to be presented to the Cabinet for approval.

Meanwhile, addressing the issue of an overhang, Previndran said the number and value grew by 8.84% and 12.88% respectively in the Klang Valley due to properties launched in 2019. 

“The problem then was ‘enthusiastic building’, whereby [developers] just went forward and launched without property market study analysis about what buyers want and what buyers can afford,” said Previndran, adding that the problem persisted in 2021.

The expert revealed: “The majority of the overhang are landed residential as opposed to serviced apartments. They are in the range of RM500,000 to RM1 million. However, amid the pandemic, mortgage approvals continued to be on the rise, and developers got creative at driving sales.”

Value and volume of transactions grew by 28% and 19.5% respectively in 1Q21 compared to 1Q20, a sign of a resilient market and pent-up demand, said Previndran.

He noted that the Iskandar Malaysia market in Johor “was the worst-hit market in the region”, with an overhang close to double of the Klang Valley. Last year, the overhang in Iskandar grew by 27.94%, and 73% of the overhang units were serviced apartments (RM500,000 to RM1 million). 

“I foresee an increase [in overhang units] in Iskandar next year as well as launches in 2019 come into the picture. However, astute developers in Johor saw this coming and switched to landed properties very quickly, which we can observe from the incoming supply and planned supply. This also resulted in very good sales (1Q21 compared to 4Q20). There was a drop of 10% in volume but an increase of 4% in value in 1Q21 compared to 1Q20,” said Previndran.

The panellist asserted: “In the recent months, mortgage applications and approval value remained close to historical peaks. We were from a low base last year, but the rebound was close to 200% year-on-year (y-o-y). This will continue to be driven by strong pent-up demand, a resilient market, low interest rates and the ongoing HOC (Home Ownership Campaign), which will bode very well.” 

A changed landscape 

CBRE I WTW’s Foo said there is an oversupply in the office, retail and industrial sub-sectors, and occupancy rate is at an all-time low, with pressure on rental. 

“Companies, occupiers and landlords need to prepare for when the lockdown is lifted. During pre-pandemic days, the office structure was rigid, with the headquarters (HQs), satellite offices, offices on project sites, and [now] flexi (flexible) spaces have been adopted. Moving forward, offices will rely more on technology, prop tech (property technology) and others. Hybrid working will be the new norm depending on the business strategies, workforce and workplace solutions.

“It will be like a spider web. Business continuity plans will be a concern as in how to maintain the business with all the workers working remotely. WFH (working from home) will be a permanent feature, but will it be the dominant factor within the office structure? In my opinion, it will not be,” said Foo. 

“Wellness will be a key thing moving forward with the public being concerned whether it is safe to return to the office, and also whether the offices will have an open plan or a cubicle-type structure. This is something that landlords and occupiers may need to consider,” added Foo. 

Foo expects demand for offices to be reduced in the short term. However, in the midterm, there will be an emergence of premium requirements and larger spaces.

“Moving forward, there will be a need to return to the office and demand will return back to normal in three to five years, especially between 2022 and 2023, with a new office environment.” 

He added that the vacancy rate is still manageable with an increase of 1.5% to 20% to date.

Meanwhile, the retail segment saw a double-digit decline during the pandemic, which carried into 1Q21 with a decline of 4% to 5%, said Foo. 

Foo believes that online shopping will not replace physical stores, while safety and health concerns may provide impetus to the introduction of “open concept” malls and other features, such as high-tech product experience.

“Moving forward, the adoption of e-commerce, technology, big data, the design of shopping malls and the delivery will change completely. E-commerce, in particular, has grown by 18% (US$13.5 trillion or about RM57.19 trillion) compared to 8% in 2015. It is an area we need to pay attention to.” 

As for the industrial and logistic sub-sectors, Foo expects to see adoption of new technology and “huge demand for data centres”. Pandemic-led demand for cloud storage, videoconferencing, online schooling, gaming entertainment, social networking and WFH platforms surged by 41% in 2020, compared to its usual annual growth of 8%.

-The Edge Markets, July 28, 2021-

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