13 April 2021

The National Property Information Centre (NAPIC) expects the property market to witness a soft upturn in the second half of 2021, with recovery mainly dependent on the economic and financial outlook of Malaysia.

NAPIC believes the rollout of the COVID-19 vaccine will play a vital role in determining the growth trajectory of the economy, reported The Star.

“This will help boost business confidence, household sentiment as well as the general economy,” said NAPIC in its Annual Market Report 2020 as quoted by The Star.

What Analysing 20 Years Of Malaysian Property Market Data Reveals

A property analyst agrees, saying the property market will be driven, as always, by the residential sub-sector.

“The bulk of transactions will be from the residential sub-sector. While most buyers are cautious about the outlook for now, there is growing optimism, especially with the vaccine rollout,” he told The Star.

With developers expected to be more aggressive to drive sales, he believes that this year will be a buyers’ market.

He also expects the Home Ownership Campaign (HOC), which was extended until end-May, to help drive sales in the residential sub-sector.

Kicking off in January 2019, the HOC was initiated to address the country’s property overhang problem. It was initially intended for six months, but was extended for the entire year.

The campaign proved successful, generating a total sales of RM23.2 billion in 2019, exceeding the government’s RM17 billion initial target.

In June last year, HOC was reintroduced by the government under the Short-Term Economic Recovery Plan (Penjana) to boost the property market as it was adversely affected by the pandemic.

And since its reintroduction last June, a total of 34,354 housing units worth RM25.65 billion was sold as of 28 February 2021, said Real Estate and Housing Developers’ Association’s (REHDA) President Datuk Soam Heng Choon.

Kenanga Research, however, noted that while property sales may rebound this year, it does not expect the recovery to reach pre-pandemic levels.

“While 2021 would be poised for a rebound in terms of sales and earnings due to a low base effect, visibility beyond 2021 remains bleak. In fact, based on targets set by developers under our coverage, the bigger developers like Sime Darby Property and S P Setia are aiming for lower sales compared to pre-pandemic levels, alluding to a lack of conviction for a sustainable rebound,” it said in a note as quoted by The Star.

“Bear in mind, this is backed by accommodative policies providing temporary support. Note that the HOC and relaxed loan margins will end in May, while the real property gains tax exemptions will end in December 2021.”

According to an analyst, extending the HCO would help spur the property market.

“Many property players are hopeful that the HOC will be extended. Sales were especially impacted earlier this year when the government reimplemented the movement control order in January,” said the analyst as quoted by The Star.

NAPIC expects the residential market to post a slow uptick in the second half of this year, with focus remaining on the affordable segment.

It underscored that a total of RM1.2 billion in funds under Budget 2021 had been allocated by the government to housing initiatives, especially for the low-income group as well as to various incentives aimed at promoting homeownership, particularly for first-time buyers.

NAPIC described 2020 as a challenging year for the residential sub-sector, in view of the COVID-19 pandemic.

In 2020, the sub-sector registered 191,350 transactions worth RM65.87 billion, down 8.6% in volume and 9% in value compared to 2019.

Selangor contributed the highest volume and value, as it accounted for 23% of total volume with 44,032 transactions and 33% of total value at RM37.79 billion.

There were also fewer new launches at the primary market, at 47,178 units in 2020, down from 2019’s nearly 60,000 units.

NAPIC said the cautious buyer sentiment and sluggish property market contributed to the market’s modest sales performance at 28.7%.

Meanwhile, NAPIC revealed that the number of overhang units declined 3.6% to 29,565 in 2020, albeit the value increased 0.5% to RM18.92 billion.

Kenanga Research expects the persistent overhang issues to have an adverse impact on developers.

“Already faced with stagnating house prices, developers will have to compete with the huge overhang of products available in the market,” it said.

“The overhang problems have been gradually worsening and were recently exacerbated by the Covid-19 pandemic. Note that overhang units mainly comprise high rise/serviced residences priced between RM300,000 and RM1 million.”

In 2020, there were 23,606 overhang units of serviced apartments with a total value of RM20.76 billion, higher by 37.7% in terms of volume and 38% in terms of value compared with 2019.