This article first appeared in Forum, The Edge Malaysia Weekly on May 11, 2020 - May 17, 2020

Welcome to the new world. I wish this could be said in a celebratory manner but I believe many share my sentiment of caution and trepidation. The Movement Control Order (MCO) has given us a taste of the required and inevitable adjustments in the way we live, socialise and work until a vaccine is found for the Covid-19 virus. The world as we know it has changed and for all of us, it has been about getting used to a new normal that steers us to be distanced physically while being virtually connected.

Recent crises have been financial in nature, stemming from overexuberance, greed and even war. This, however, has been a completely different ball game.

The MCO was unprecedented for most of us. Unless one lived through the Malayan Emergency and the May 13, 1969 racial riots, one would not have experienced lockdown orders where businesses had to close and everyone forced to stay indoors.

The prolonged MCO and work-from-home environment has transformed many aspects of our daily lives. Our digital, spatial and consumer experience has been redefined completely. The digital revolution, which has been pursued by many corporations, is now accelerated. We are utilising more digital tools to ensure work goes on, and we have come to realise that working remotely does not have to come at the expense of being productive.

The current pandemic has given rise to many questions about what happens next. We are already seeing the major impact it has had on the oil and gas industry, with oil prices hovering significantly below the government budget assumptions. Excess capacity in the supply chain is made worse by falling demand, and trade tensions will have serious repercussions for our economy as a significant amount of the country’s revenue comes from oil. Tax revenue, which contributes the most to our government’s revenue, will be impacted by lower income tax due to job losses and salary cutbacks.

Such a backdrop leaves a lot to be desired when it comes to the economic outlook for the next one to two years. While waiting for the magic potion (read: vaccine), everyone is putting on a brave face and trying to ensure their respective businesses survive. We have seen companies emerge stronger from the brink of collapse before. These corporations are those that focus mostly on their customers and pursue an aggressive customer-focused product strategy.

For the property sector, the outlook is daunting. Even before the Covid-19 crisis, we were already facing a slowdown in demand and increased overhang. As at end-2019, there was an overhang of 47,806 residential and serviced apartment units valued at RM33.9 billion. Serviced apartments added another 5,771 units to our total overhang number compared with end-2018. Over just three years, we have increased home overhang by 156%! To make matters worse, there are 106,519 units of unsold properties currently under construction that will further contribute to the already large number, representing a crisis.

The days of making a quick profit with minimal capital outlay, which led to the speculative nature of property assets, are long gone with the abolishment of the Developer Interest Bearing Scheme and capping of loan margins for third property purchases. From 2013, we have seen year-on-year reductions in home property transactions, and it is likely that it will take years to clear the overhang completely.

Navigating our way through this crisis requires plenty of innovation. We will need to recognise and be sensitive to distinctive buyer profiles. At the outset, buying a home to stay in is driven by emotions in the pursuit of long-term security while for investors, purchasing property is a form of accumulating assets for good returns.

In the new world scenario, it can be expected that there will be fewer people visiting crowded places such as shopping malls and public events. This, in turn, means that organising property fairs will likely be a different ball game. Perhaps as forgetful human beings, this apprehension will not last long for us. But what is for certain is the impact on how we go about doing our business.

The use of technology will be more pressing. Sales and marketing activities will involve utilisation of the latest digital tools as we seek to bring show units to one’s fingertips. The shift towards working from home will be more apparent and will become the new norm. Hence, the need for office space could be affected, resulting in lower rental yields. Physical interaction and the need to be at the office will be limited, thus affecting how we logistically organise our offices.

Homes of the future will be more than a place to rest, sleep and have meals with your loved ones. Experience from the past few weeks has shown that a home resembles a pod that connects us to many service providers that form a part of our daily activities. We now conduct both professional and personal meetings, exercise remotely with our friends, attend classes and webinars, have food and essential items delivered in a contactless manner, all from the comfort of our homes.

For developers like us, it is essential that we understand these future trends and design homes accordingly. Innovation in design starts from having a clear understanding of our customers’ needs, and success will be driven by how enticing our products are to our customers. That is why, for us, the philosophy of exciting, value-driven and easy (to own) is crucial as we embark into an uncertain future.

Property development is part of a vast ecosystem in a myriad of industries. Growth in property sales and mortgage approvals are closely linked to consumer confidence and liquidity in the market. The sector has an important role in growing the economy as it affects more than a hundred industries such as banking, infrastructure contractors, building contractors, consultants, engineers, suppliers and logistics providers. That is why, for better or for worse, a vibrant property sector is critical to the economy. The government can leverage its fiscal strength and access to policy instruments to ensure stability in this sector. The National Property Information Centre has reported that “affordable housing and finding the right solutions to the property overhang will continue to be the main agenda”.

Whilst we try and find solutions to the overhang situation, the limitations of social distancing will have cost repercussions. Contractors rely heavily on foreign labour, and a more stringent health check procedure will negatively impact productivity. Construction of buildings will likely take longer than before if we are to maintain the same construction methods. Investment in new construction methods and technology will be needed, and this will push up costs. Therefore, it begs the question of whether a review of the Housing Development Act will be necessary.

The near future dictated by social distancing, low consumer confidence and a bearish economic environment is a call for all of us to be united. There will never be a perfect solution that fulfils everyone’s wish list but an understanding of each other’s pain points with solutions that are acceptable to all is the kind of unity we need right now.

This will ensure that we will be able to see through this crisis with minimal damage and be ready for the next bull cycle. No one would have thought that within the space of a few months in 2020, the world would change right before our very eyes and push us to our limits. The fight against the coronavirus has united us and brought out the best in Malaysians. Can we continue to be united in our battle to rebuild our economy?

Anwar Syahrin Abdul Ajib is the managing director/CEO of UEM Sunrise Bhd

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