We’ve made it to the last leg of 2021 after 2 years of government-imposed movement restrictions and fluctuating uncertainty in the market due to the COVID-19 pandemic.
Generally, there is an improved outlook for the Malaysian economy compared to this year as the government has begun to adopt sustainable long-term policies to regulate the effects of COVID. This provides some clarity for business operations and consumer confidence.
This year, there are mixed sentiments on the outlook for the upcoming year and although no one can know the future for certain, we can look at trends and have perceptions depending on how the market has performed thus far.
Later on in this article, we will share sentiments from various sectors of the industry.
- Market snapshot of 2021
- Looking towards 2022
- Sentiments of Industry Players (Kopiandproperty, Adrian Un, The Property Doctor, Miichael Yeoh, Ms Rose Lai of MIEA, Datuk Chua of SHAREDA, Propnex Sabah, PropertyHub, Azmi and Co, IQI and Violet Chak)
“This is a fascinating time to enter real estate because the changes over the next 20 years will be dramatic.”
- Emerging Trends in Real Estate® Asia Pacific 2022
Market snapshot of 2021
Compared to the challenging year in 2020, 2021 seemed to pick up slightly although there was a resurgence of COVID-19 infections and various degrees of MCOs across the nation at the beginning of the year.
According to NAPIC, there was a 3.8% increase in the number of transactions and a 38.8% increase in the value of transactions from the second quarter to the third quarter of 2021.
Furthermore, the performance improved considerably when comparing the first half of 2021 to the previous years.
According to PropertyGuru Malaysia Property Price Index, towards the third quarter of 2021, price trends moved with a soft upward pressure while supply was pushed down. This indicates that those buying are more financially stable and looking for higher priced property, such as landed properties.
Looking towards 2022
Generally we foresee a gradual improvement in the market with a sharper incline towards the end of the year, as we experienced in 2020 and 2021. With the Omricon variant emerging, caution is expected for the first quarter or two but a revival of consumer interest should occur with an expected stabilisation of the economy and job security, according to the national recovery plan.
It will be beneficial to revive programmes such as the Home Ownership Campaign, with an extension to the secondary market, seeing as it was a significant driving force that supported homebuyers during the pandemic. The Malaysia My Second Home (MM2H) programme that has yet to be revived could additionally make positive impacts on the market as well, seeing as how other countries are benefiting from their own foreign investment programs.
Potential buyers are recommended to take advantage of the low interest rates and adjusted prices sooner than later.
Sentiments of industry players
Charles Tan, author of Kopiandproperty.com
The property market has been affected by Covid-19 since March 2020. People who needed to buy a property would have had to think thrice. Many real estate agents were suffering when lockdowns were implemented. Many property developers delayed new launches and even had to close their sales galleries. All these slowed down the property transactions in Malaysia for 2020.
In H1 2020, we saw just 115,476 property transactions. This was lower versus H1 2019, 2018 and 2017. With the reopening of the economy and lifting of lockdowns, the H1 2021 saw total transactions of 139,754. This is showing a recovery.
What will happen in the future is anyone’s guess with Omicron starting to flare up but if we look at the property transactions during the lowest point of H1 2020, we need to realise that Malaysia’s property market remains very robust and supported by many factors including demographics and a rapidly changing economy into a higher income economy.
This is why I am optimistic that the numbers for 2022 will show that Covid-19’s effects will lessen and the property market will continue to recover. On a personal note, from March 2020 till December 2021, I did purchase a few properties. Happy viewing and deciding.
Adrian Un, Property Advisor, Author and CEO of Skybridge International
The trajectory of growth in the property market next year all really boils down to how the economy recovers and if the national average income level improves. It will take a mighty joint effort from all stakeholders to resolve the persisting overhang of properties as Malaysians struggle to overcome the strict evaluations performed by banks to secure a loan. There is an abundance of high-end ticket properties priced RM1.5 million and above, and a lack of buyers. I don’t see foreign buyers taking them up as Malaysia has not been the flavour of the year with the MM2H still in a grey area.
Although the outlook is fairly bleak, in my opinion, there are bright spots. I see the industrial sector doing well with increased activity in distribution, in terms of rentals and sales. For the residential sector, properties below RM200,000 should also fare well. Profit-sharing property investment programs are strongly suggested as the way to go next year. This is where the gross turnover is shared by the investors. The business of sub-letting is a concept that is now picking up quite well too.
Dr Victor Gan, The Property Doctor
The Sabah real estate market has been resilient in terms of the price through the past 2 years despite the Covid pandemic. There is no significant reduction in property price. In fact, "hot" areas like Likas, Damai and Iramanis has seen an increase in property prices, especially in the landed category.
Nevertheless, "Airbnb centric" properties will continue to take major hits as long as international tourism is still in a flaccid state. There will be a huge influx of these kinds of service apartments into Kota Kinabalu. Will we see another auction tsunami in Sabah as we saw in West Malaysia? I sincerely hope not.
Next year, with the material and construction cost rising fast, coupled with incoming inflation, properties are only going to get more expensive. So the best time to buy property is now as we are already at the lowest point of the real estate index in the past 12 years.
Loan financing is indeed getting harder in the last 2 years as most banks preferred salaried employees compare to employers. So if you are a salaried employee, please go ahead and get your loan fast.
Ms Rose Lai, Sabah Chairlady of Malaysia Institute of Estate Agents (MIEA)
For the residential sector, landed homes are still the first preference of many home buyers. A significant preference shift to condominiums/ apartments has occurred. The key drivers behind this are mainly due to affordability and prime location which has close proximity to necessary amenities. Many master plans of condominium/ apartment developments are also often packaged with recreational and secured facilities which are appealing to aspirational buyers.
Demand for residential property is anticipated to be challenging in the first half of 2022 due to uncertainties around the severity of the Omicron variant outbreak throughout the globe. It would be hopeful for the property market to remain resilient and pick up demand in the second half of 2022.
Datuk Chua Soon Ping, President of SHAREDA (Sabah Housing And Real Estate Developers Association)
The various stages of lockdowns over the past two years have put a strain on the economy on all spectrums.
A price hike in property is inevitable due to the spike on labour costs and building materials such as the cement price that went up by 15%, steel bars that went up almost 30%, copper wiring by 40%, and so on. The delays in construction have furthermore imposed unexpected burdens on developers due to Liquidated Ascertained Damage (LAD) costs that they must pay to buyers for late delivery of projects. The local consumer income also does not match the escalation of construction costs which has driven banks to be reluctant to lend money to new home buyers.
Foreign investment would further strengthen the economic recovery as a tool for sustainable state income. Sabah MM2H should be encouraged and welcomed as the state has great potential to attract not just visitors but investors as well through the 10 year social pass. Therefore, the threshold for foreign ownership should be reduced from RM1 million to RM600K for high rise residential and commercial suites. This would inject capital into the economy while additionally aiding the issue of over supply as bank lenders are stringent in lending to locals for these types of properties.
Miichael Yeoh, Property & Mortgage Advisor
2021 is coming to a close. A new chapter will begin in 2022. Looking back what a year in 2021. We are faced with the Covid 19 pandemic. When will this end? Well nobody can predict. Looking back, I have gone through the 1998 Asian Financial Crisis, 2008 global recession and now the 2020 health crisis.
I remember when I was working in the bank in 1998 during the crisis, there was hardly anyone buying property. Interest rate was all time high at 14.5%. One thing I can safely say is that during the health crisis we are better prepared as compared to 1998 and 2008. People still buy properties and the interest rate is at an all-time low.
If you were to ask me, in 2022 there will be an increase in house purchase if the government were to extend HOC. There are many first-time home buyers looking to buy now. Property is active again. I can see from the many invites for property talks from developers and event companies. As for the interest rate, overnight policy rate might hover around 1.75%. Give it a plus or minus 0.25%. Banks will continue to tighten the lending to borrowers as they are worried about NPL. Not to worry, the banks still lend to good credit customers.
I hope 2022 will be a good year for everyone. Best of luck…
Philomena Chai, Agency Leader of Propnex Sabah (Residential Real Estate firm of the year, NREA 2021)
The pandemic has dampened the property market and a revival very much depends on the revival of other sectors such as the palm oil industry as well as tourism. The general price levels remain high in all property sectors and there are substantial empty units, especially in the commercial and office sectors. Residential property is likely to take the lead in proper market improvement but with a limited supply of low and medium-cost of housing. Moderate growth in the industrial sector is also expected.
Any obstacles to recovery include;
- Comparatively high property prices
- Stringent loan applications
- Weak economy
The target markets will be the higher income groups for selective properties and major demand groups who have a need for medium and low-cost housing.
Mr Wong Chaw Kok, Managing Director of Azmi and Co
We are in extraordinary times but after being in the pandemic for the last two years, we know more or less what to expect. It depends now on how it pans out but I see the economy opening up gradually.
To help us predict, we can consider looking at the property clock. A method that we can use to understand the cycles of the property market that is based on the recognized stages where a “boom” is followed by a drop in prices until it reaches the bottom of the market, before it starts recovering.
If we are in winter now, I believe next year will be spring. Red hot summer may be in 2025, perhaps. I am basing this on the cycles we have witnessed that have been caused by periodic crises over the past few decades. If it is so, get your bullets ready. I do not believe the market will collapse after the moratorium ends as people are more prepared now. It is the best time to jump in the game while supply is curtailing, house prices are increasing and interest rates are at an all time low.
Enoch Khoo, Director & Group Chief Strategist at PropertyHub Sdn Bhd
This year at PropertyHub, our agents yielded a huge, significant growth in transactions compared to last year. We expect to continue this performance next year, however it all depends on the uncertain bank policies. As we all know, China shipping rates have skyrocketed between 100% - 700% since pre-pandemic times. Therefore I see the industrial and warehouse sector growing tremendously next year as there is a massive demand for it now due to logistics.
TJ Wong, IQI Real Estate Negotiator
For new developments, more projects will be launched compared to the past 2 years, especially affordable developments ranging from Rm300k to RM500k as they are market driven properties and also are the most sellable properties.
Buyers can also consider buying from developers in respect of on-goings projects or completed units because some are 'value buy' as the pricing is still "old price" which has yet to factor in increasing cost of building material.
For the secondary market, property prices are expected to be stagnant in general and landed properties have been proven to be recession proof for the past 2 years.
For 1st time homebuyers, 2022 will be the best time to get their own properties as the Government has continued to provide incentives such as stamp duties exemption & 100% loan for residential properties valued at RM500k and below. Furthermore, low bank interest will be expected to continue in 2022. Individual owners can consider selling their properties which are owned for more than 5 years as the RPGT will be exempted.
Violet Chak, property advisor
Even though we were still in the pandemic in 2021, market reports show that the market improved in the first half of 2021 compared to the first half of 2020. This tells us that buyers are taking advantage of the situation to invest now while property prices are considered to be low.
Not all property types will be sustainable post pandemic, however. As a property investment advisor, we make sure to understand the buyers needs and recommend the best option for them. Currently, we are focusing on hybrid products that yield short term and long term results.