Property market expected to remain in the doldrums

The soft property market is not expected to recover in the immediate future.

The property market is expected to remain soft for now. And while the primary market remains supported by the Home Ownership Campaign (HOC), the sub-sale or secondary market is unlikely to see an upturn anytime soon.

During the Movement Control Order (MCO), the economy came to a complete standstill and activities in the secondary and auction markets were halted as property viewings could not be conducted.

Global real estate consultancy Savills Malaysia director of research and consultancy Amy Wong told Property Advisor that, based on its observations, the number of properties being put up for auction is expected to increase.

“We expect to see a rise in the number of auction properties on the market. Many are non-landed units in Kuala Lumpur and Selangor and the reserve prices are easily 30% below the last traded price for similar properties.”

She added that the secondary residential market will continue to see subdued asking prices and rents, especially newly completed properties.

“This is due to the stiff competition from new launches, which offer almost zero entry cost to homebuyers. The price point retracted slightly even before the MCO.

“House owners may take a longer period to offload their properties on the secondary market and asking prices may drop further to meet bank valuations.”

According to Wong, the properties affected by the subdued pricing are spread across greater Kuala Lumpur and include non-landed and landed properties.

“We see some of the newly completed landed properties in new townships being offered for sale by investors at the purchase price or even below. We expect residential units that were purchased for investment purposes to be hit hard during this difficult time. Investors with weak holding power will suffer the most.”

Wong noted economists are predicting another overnight policy rate cut by Bank Negara Malaysia within the year.

On the primary market, meanwhile, she said some savvy developers are soft-launching affordable housing projects via online platforms, coupled with hefty freebies and price rebates to attract homebuyers.

“Depending on location and price point, both landed and non-landed residential projects are reportedly well-received by homebuyers, thanks to the re-introduction of the HOC 2020, which is speeding up the decision to buy a home.”

Some new projects are being offered with a 10% discount per the requirements of HOC 2019 and 2020, she said.

“The primary market with the right products and price points will continue to sell well. First-time homebuyers are the main target.”

Market outlook after the moratorium ends

A stable job market is crucial to support the property market. Wong believes banks will apply more stringent lending rules in response to this.

“Certain households can apply for an extension of the moratorium but the conditions might be a hassle. Hence, we do not think many will opt to extend the moratorium.”

In July, Prime Minister Muhyiddin Yassin announced a three-month extension (upon application) of the loan repayment moratorium for households affected by pay cuts and job losses.

The government is currently offering a few incentives for homebuyers, included in HOC 2020 (from June 1, 2020 to May 31, 2021).

A minimum 10% price discount is applicable to all residential units that are not subject to government price controls.

Stamp duty is waived for residential properties in the price before discount range of RM300,000 to RM2.5 million. (Rehda image)
Stamp duty is waived on instruments to secure loans. (Rehda image)

Real Property Gains Tax is exempted and the 70% loan-to-value ratio on the third housing loan has been removed.

However, Wong said most of these incentives are applicable to the primary market.

“It would be good if the government could consider extending the incentives to the secondary market, which amounts to 70% of the total residential transaction volume in the country.”

This article was written by Sharina Ahmad of PropertyAdvisor.my, Malaysia’s most comprehensive source of property data, property analytics and insights.