2H 2021 Outlook of Malaysian Property Market
The economic challenges resulting from the COVID-19 pandemic make it challenging to forecast Malaysian property marketing in the second half of 2021. However, various developments involving healthcare, the national economy, and the property sector have become clear. Such indicators create prospects for a side-lined stock market in the short term and a short-term recovery rally in the local housing market towards the fourth quarter of 2021.
According to the Malaysia Economic Monitor: Weathering the Surge report by the World Bank, the ongoing pandemic and movement restrictions will continue to affect Malaysia's economy in the near term. The current resurgence of the COVID-19 pandemic and the movement control order (MCO) reimposition is expected to significantly impact private consumption. The ongoing MCOs increased precautionary behaviour and subdued wage growth are all expected to exert negative pressure on private consumption activity.
However, with recovering global demand, export growth is likely to gain momentum. Given the acceleration of advanced nations' vaccination programs and the reopening of their economies, global demand is expected to continue to recover in the near term.
Accelerating vaccination rolloutStatistics from Malaysia's Special Committee on Covid-19 Vaccine Supply (JKJAV) indicated that around 16.4 million people have registered for the national Covid-19 immunisation programme as of 26th June 2021. 5.2 million people have received their first dose. Against this backdrop, Malaysia's economy is projected to grow by 4.5%. This projection reflects the slower-than-expected suppression of the pandemic and implementation of the vaccine rollout. The pace and trajectory of growth will depend on several factors. This includes the length and severity of movement restrictions, the effectiveness of pandemic containment measures, and the pace of the rollout of the vaccination program.
According to Channel News Asia, Minister of Science, Technology and Innovation Khairy Jamaluddin cited vaccination targets, with the vaccination exercise to be completed for the population in Selangor, Kuala Lumpur, Putrajaya and Sarawak by the end of August. Vaccination exercises for key economic states Penang and Johor would likely be done in October, while the rest of Malaysia would be completed by December.
Vaccination is expected to be administered to all Malaysians by the fourth quarter of 2021.
Policymaking supports the property market.While economic and healthcare factors have an impact, policymaking provides some support to the property market in the second half of 2021. According to a Bernama news report, the government has reintroduced the Home Ownership Campaign (HOC), featuring stamp duty and real property gains tax (RPGT) exemptions, to stimulate the property market and provide financial relief to home buyers. In announcing the short-term economic recovery plan, which is PENJANA, Prime Minister Tan Sri Muhyiddin Yassin said that the stamp duty exemption would be given on the instruments of transfer and loan agreement for the purchase of residential homes priced from RM300,000 to RM2.5mil. However, this is subject to a discount of at least 10 per cent provided by the developer.
The stamp duty exemption on the instrument of transfer is limited to the first RM1mil of the home price, while full stamp duty exemption is given on loan agreement effective for sales and purchase agreements signed between 1st June 2020 to 31st May 2021. The Home Ownership Campaign was extended subsequently to 31st December 2021.
The central bank's record-low overnight policy rate of 1.75% also makes homeownership attractive as it means lower costs for property purchases. With substantial savings in stamp duties and discounts on property, it is certainly an ideal time to consider purchasing a property.
Meanwhile, the RPGT exemption is for the disposal of residential homes from 1st June 2020 to 31st December 2021. He added that the exemption is limited to the disposal of three units of residential homes per individual.
The loan process is expected to be made more available for potential homebuyers starting from Q3 of 2021.
Additionally, the current 70 percent margin of financing limit applicable for the third housing loan onwards for properties valued at RM600,000 and above will also be lifted during the HOC, subject to internal risk management practices of financial institutions. REHDA president Datuk Soam Heng Choon told EdgeProp.my, "This is good news for us, especially for the property buyers, as they do not have to rush in now. The extension will enable buyers to have more time to consider, and this will also help to support the economic recovery in the second half of the year as we are seeing a long lockdown period."
A news report from The Star cited a UOB Kay Hian report that said that property loan approval rates are expected to start recovering from the third quarter of this year, as lockdown restrictions begin easing with the gradual opening of the economy. UOB Kay Hian said that it anticipates a potential strong rebound by property companies in Q4 of this year following subdued earnings.
The research house said that developers could better weather the storm of the pandemic this time as digitalisation efforts will cushion the lockdown impact. "Since mid-2020, property companies have been accelerating their digital transformation to digitalise the end-to-end property buying process without the buyers' physical presence."
“This helps developers to accelerate the property sales conversion rate. Importantly, we expect improved margins for 2021 amid lower operating expenditure, particularly cost savings from marketing and administrative expenses given the wide adoption of online platforms.”
Mak Academy principal Mak Kum Shi is a Master of English Studies and a trainer in English, Communications, and Real Estate. As an internationally renowned writer, he has an extensive cover story portfolio on property, entrepreneurship, information communications technology, lifestyle, architecture, and interior design. Learn about English, Communications, and Real Estate by visiting https://makacademy.asia/