As Malaysia gears up for endemicity following a near two-year struggle with the Covid-19 pandemic, all eyes are already on what 2022 will look like for the local property market.

At the virtual Malaysian Property Summit 2021 earlier this week, consensus is that the market next year will continue its path to recovery and hopefully, reach pre-pandemic levels.

Rahim & Co research director Sulaiman Akhmady Mohd Saheh says the gradual reopening of the economy will help spur the property sector.

“For the residential market, normalisation of post-pandemic standard operating procedures and the high vaccination rate in 2022 will be the boost to pushing transaction activities back up to pre-Covid-19 levels, as physical movement and housing campaigns resume.”
Additionally, Sulaiman says increased vaccination rates, easing physical containment measures and build-up in financial savings from 2020’s expenditure-suppressed period, will spur consumer sentiment.

“Strengthening the affected labour market will also be key to providing income security and stability.

“The forward progress in mega infrastructure projects, such as the East Coast Rail Link, LRT3 and Pan-Borneo Highway will also catalyse greater urban development and better accessibility.”

Going into 2022, Datametrics Research and Information Centre managing director Pankaj Kumar says domestic interest rates are expected to remain stable and supportive of market activities.

“The property market today is a buyers’ and renters’ market. However, household income will need to revert back to 2019 levels and rise, before affordability can be improved.”

To spur the market further, Pankaj is hopeful that the ongoing Home Ownership Campaign (HOC) will be extended into 2022 and comprise the secondary market as well.

Currently, the HOC is only applicable for properties within the primary market.
Meanwhile, Sunway University economics professor Yeah Kim Leng says the local property market is expected to experience a rebound in 2022, on the back of the stronger economic performance forecast for next year.

“With the economy projected to grow 6% next year, performance of property-related service industries is expected to improve in 2022, but it will be less buoyant than pre-pandemic levels.”

Nevertheless, Yeah says Malaysia’s property market remains resilient, despite suffering the “second worst-ever” recession in 2020.

“We expect a firmer property demand outlook on the back of an economic recovery in 2022, wealth effects from commodity prices and stock market gains, continuous landing from banks, as well as positive demographics and household formation.”

Yeah however adds that there is still an undersupply of affordable housing and oversupply of high-end units being launched.

This oversupply of units has led to a serious overhang situation that the Malaysian property market has had a tough time resolving for many years.

According to the National Property Information Centre (Napic), a total of 31,112 overhang units worth RM20.09bil was recorded in the first half of 2021.

This was an increase of 5.2% and 6.2% in volume and value respectively, against the preceding half.

The serviced apartment sub-sector, meanwhile, recorded 24,064 overhang units with a value of RM20.41bil in the first six months of this year, indicating a marginal increase of 1.9% in volume.

However, value declined by 10.2% compared to the preceding half.

Meanwhile, the unsold, under construction recorded 42,358 units, an increase of 20.1%.

To address the overhang situation in the country, the government kicked off the HOC in January 2019.

The campaign, which was intended for six months, was extended for a year.

It proved successful, having generated sales totalling RM23.2bil in 2019, surpassing the government’s initial target of RM17bil.

The government reintroduced the HOC in June last year under the Penjana initiative to boost the property market after it was adversely affected by the Covid-19 pandemic.

The campaign was extended to the end of this year, with property consultants and developers fully supporting the move.

In March this year, during the Real Estate and Housing Developers’ Association’s briefing on the property market for 2021, its president Datuk Soam Heng Choon revealed that since the HOC was reintroduced last June, a total of 34,354 residential units valued at RM25.65bil had been sold as at Feb 28, 2021.

To curb the overhang situation, Pankaj says developers need to focus on what the market wants.

“Failure to do so will result in low take-up rates and rising overhang. They need to restrain themselves when launching new products, not realising that the market is soft.

“In this case, the authorities should control dishing out new development orders.
“Everyone, namely, the developers, local authorities and financiers need to work together rather than in isolation.”

RHB Research regional property head Loong Kok Wen says it’s not easy for developers to halt a project.

“If you put a sudden stop to it, it can have implications on other supporting industries.

“However, what can be done is having some kind of a database in place, where, prior to a development, the relevant parties can assess whether there is sufficient supply within a particular location.

“With this database, the local authority will be able to know whether to approve a project in a particular location.”

Khong & Jaafar managing director Elvin Fernandez also says one can’t just randomly freeze a particular project once it has been greenlit.

“That’s like closing the stable doors once the horses have bolted.”

Elvin believes that the power to address the overhang situation rests with the local authorities and the banks.

“The local authorities should demand an independent market study from the developer, prior to providing a development order to developers.

“Similarly, the banks should also demand the same (an independent market study) from developers before approving a loan.

“Therefore, both these bodies (local authorities and banks) need to play a role in determining supply.”

Meanwhile, TA Securities in a recent report says it anticipates the upcoming Budget 2022 to be primarily helpful to low-to-middle-income earners, as well as to first-time home owners.

“We are also hopeful for more measures to ease the burden on property owners by extending the real property gains tax exemptions, along with lower rates.

“We also anticipate friendlier measures for property developers and foreign buyers to spur market activities. We do not anticipate any new dramatic tightening policies, as this would derail the recovery of the property sector.”