KUALA LUMPUR: The reopening of the economy is expected to be gradual as the vaccination drive continues to be ramped up under the four-phase National Recovery Plan (NRP). The country’s gross domestic product (GDP) growth for 2021, which was previously projected at between 6% and 7.5%, is expected to be revised lower due to the adverse impact of the prolonged pandemic on various economic sectors. 

This is according to Knight Frank Malaysia’s Real Estate Highlights 1st half of 2021, which features the property market performance findings across Klang Valley, Penang, Johor Bahru, and Kota Kinabalu.  

“The residential market will continue to self-correct amid challenges brought on by the Covid-19 pandemic. There were fewer completions and launches in 1H2021 as the strict containment measures delay construction works, project delivery and completion of real estate transactions. In the secondary market, no property viewings and on-site surveys have been allowed since June,” said Knight Frank Malaysia managing director Sarkunan Subramaniam.

However, there appears to be pent-up demand in the housing market evident by the short burst of recovery in market activity when movement restrictions were temporarily lifted, added deputy Knight Frank Malaysia managing director Keith Ooi.

“For the remaining part of 2021, we believe the overall interest in the residential sector is likely to remain subdued until the health crisis is brought fully under control,” he said.

During the review period, the high-end condominium market in Kuala Lumpur continues to undergo price correction due to weaker demand albeit rising inventory, both existing and newly built. Similarly, in the tenant-led market, rentals remain under pressure due to weaker leasing demand. 

Several key property-related policies and incentives have been announced under the various stimulus packages to uplift the residential market. These include the extension of the Home Ownership Campaign (HOC) until Dec 31, 2021 as part of the Pemerkasa+ Package and reintroduction of the six-month moratorium on bank loans for all individuals and SMEs under the Pemulih Package.  

Other accommodative policies include the current record low-interest-rate environment with OPR remaining at 1.75%, the exemption of Real Property Gains Tax (RPGT) for up to three residential properties for Malaysian individuals until the end of 2021 and the uplift of a 70% margin of financing limit for the third housing loan onwards during the HOC period.  

The general buyer focus has now shifted, said Subramaniam.

“Looking ahead, there is a window of opportunity as the deployment of vaccines is accelerated to allow the gradual reopening of more economic sectors under the National Recovery Plan. The resumption and commencement of new mega-developments, supported by improved infrastructure, will boost economic activities and also aid in the recovery of the property market,” said Subramaniam 

On a positive note, the HOC has successfully reduced the property overhang with an estimated 34,354 residential units worth RM25.65 billion sold from 1 June 2020 to 28 February 2021.  

The prolonged pandemic has also accelerated the adoption of technology in property development with more developers embracing digital marketing to clear unsold inventories and boost sales of newly unveiled products. 

Subramaniam added that the general buyer focus has now shifted from investment towards creating a haven to live, relax and work in comfort due to the Stay at Home orders amid the various phases of MCO. 

Thus, potential buyers and investors who have the financial capability may be enticed to enter the housing market can take advantage of the price discount, attractive deals, stamp duty exemption as well as the current low interest-rate regime. 

The Covid-19 pandemic has also fuelled demand for residential properties, especially new landed housing outside the city, in established and upcoming suburbs with good connectivity where prices are more affordable and competitive. With the potential shift to hybrid work arrangements post-pandemic, buyers are seeking ideal living spaces with a higher emphasis on functionality and comfort. 

There is strong interest from domestic investors shifting from the stock market, said Ooi.

The economy is still in its recessive phase and market confidence is expected to return gradually by early 2022 as buyers and financiers are all on cautiously optimistic mode. The property market is widely expected to start recovering on the back of a more positive outlook, following the recent acceleration in vaccine drive.

Moreover, there is strong interest from domestic investors shifting from the stock market to safer and less volatile alternative investment products, Ooi concluded.