Effects of Covid-19 on Local Property Market

THE outbreak of the Covid-19 has significantly reduced the average sales of businesses across multiple industries and will play negatively on the local property market, says a senior real estate marketing consultant.

“Many developers are already struggling to keep their heads above water. With daily updates, new information, and more confirmed cases, the long term effects of Covid-19 are simply unknown,” said the consultant who wish to remain anonymous.

“Ultimately, it is true that times are tough. People are moving away from buying luxury and big ticket items including property.

“They are saving in anticipation of worst times ahead. But as our history will show, the market will recover. Things will eventually bounce back but it may take a longer time as the world economy is in a crisis,” he said.

Early this year there was a neutral outlook for property prospects in 2020, with glimmers of opportunity amid the challenging market environment.

Measures were introduced in 2020 Budget to address specific issues in Malaysia’s property landscape.

Property developers and home buyers, including investors breathe a sigh of relief in January after Bank Negara Malaysia (BNM) decided to reduce the Overnight Policy Rate (OPR) to 2.75 percent – the lowest since 2011.

The OPR is an overnight interest rate set by BNM. It is a rate a borrower bank has to pay to a leading bank for the funds borrowed.

The OPR has an effect on employment, economic growth and inflation. While changes to the OPR have minimal impact upon home loan rates, a cut of 25 basis points translates to a fractional reduction in loan installments, and is still a silver lining for industry players.

Even though there may be a decline in foreign purchasers such as from Hong Kong and China and a delay in projects throughout the supply chain following the Covid-19 outbreak, Malaysia’s property market would not be directly impacted.

But real estate experts and analysts now have different thoughts about the property market following the wide spread of Covid-19.

Speaking to an analyst on condition of anonymity, he said “rough times” are ahead for developers.

“If you look at filings with Bursa Malaysia, many developers posted lower earnings and there are some companies which incurred losses from their operation.

“They are not launching as aggressively as they did before. The numbers and the value of properties they are launching have reduced year-on-year since 2017. It is quite likely that many developers will not meet their sales targets this year as they downsize their property launches with new events in the market place,” said the analyst.

The analyst said developers are putting their bet on another round of Home Ownership Campaign (HOC). They hope that the government will introduce HOC 2020 when the situation has cleared up on Covid-19.

HOC 2019 cleared 31,415 residential units developed by federal and state governments, and private builders, valued at a total of RM23.2 billion as at November 2019, surpassing the initial target of RM17 billion.

However, according to sources close to the Real Estate and Housing Developers’ Association Malaysia (Rehda), the final value of total sales from HOC 2019 could exceed RM30 billion.

“The last I heard was the final numbers are being tabulated, to include the sales achieved in the month of December. The word I got is that the final sales could surpass RM30 billion.

“This is good and it shows that people are willing to buy a property which they can afford. A lot of developers offered between 10 per cent and 30 per cent discounts, including freebies, which is a good thing as they got the buyers in.

“This trend may repeat with HOC 2020. Developers are keeping their fingers crossed.” the analyst said.

Credits to NST -Property