Housing market still volatile, but warehouses are booming

As with most sectors of the economy, the property market was hit hard by the Covid-19 pandemic.

PETALING JAYA: A property expert says supply for domestic property is expected to rise but demand will fall, causing the real estate market to remain “very volatile”.

However, commercial real estate is doing well. Demand for warehouse space has gone up because of limited supply and an increasing need to store items for online transactions.

Siva Shanker, chief executive of an international property consultancy, said the housing market went into panic after the national lockdown as no one knew what to expect from the Covid-19 crisis.

Residential property remained the most volatile segment because of high supply and low demand.

“This sector will be shaky and will take a while to see some strong traction,” he said, and more data would be needed on the market’s reaction after a six-month loan moratorium ends in September.

“But industrial property seems to be doing well with demand for warehousing increasing due to limited supply and the demand to keep online items increasing,” he told FMT.

Investors looking for high yield properties may also benefit as owners may put their property up for sale, he said. “Companies suffering because of bad cash flow may want to sell their assets.”

But Siva said prices for good investment properties will remain stable as they are sold based on their yield.

“For the owner, if the investor does not want to buy at the given price, he will go to the next investor or the next because there is demand for such investment, with long-term yields” he said, adding that the market will see strong investor buying now and selling at a higher rate when the market picks up.

He said demand for new office buildings is increasing but at the expense of older buildings due to the lower rent caused by the slow economy.

Owners of older office space should refurbish and re-brand their units so as to grab potential tenants’ attention.

As for shophouses, he said the demand and rental rates remain the same “during a good and slow economy”.

Siva urged banks to offer targeted moratorium to individuals and businesses as it will help to alleviate their loss.

“If a person loses his or her job then the bank can give 100% for six months,” he said, adding that the same can be done for businesses.

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