Friday 29 Mar 2024
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"We expect the residential market to remain focused on the affordable segment, as overhang is still a concern."

KUALA LUMPUR (Jan 26): The property market is expected to be soft this year and recovery is likely to be delayed to 2022, according to Rahim & Co. Optimism is held for the turning point to be in the latter parts of 2021 with the vaccine about to be mobilised, but with the more recent resurgence of cases and reimplementation of lockdowns, a further recovery delay to 2022 would not be a surprise, it said in its Property Market Review 2020/2021.

“We expect the residential market to remain focused on the affordable segment, as overhang is still a concern. Secondary sales are expected to dominate the market with price consolidation and the Home Ownership Campaign 2021 will give the market a boost,” said research director Sulaiman Saheh in a virtual press conference today. 

In the office market, concerns about the incoming supply remains. Rentals and occupancy rates will continue to be under pressure, influenced primarily by relocation activities rather than new tenancies. 

“Older buildings are looking at asset enhancement exercises or even being repurposed, while co-working spaces will continue to expand, especially in Transit Oriented Developments,” said Sulaiman. 

Meanwhile, retail will face more challenges and retailers are expected to re-strategise to offer better values and experiential retail options. E-commerce trends will continue and synergies with brick and mortar outlets and as the popularity of e-wallets continues, a cashless society is emerging, said Rahim & Co. 

Meanwhile, Sulaiman noted that the industrial sector is attracting more attention than others at the moment. The sector will continue to be driven by the logistics sector and there will be demand for large warehousing facilities with built-to-suit arrangements. 

“Advancement of technology through IR 4.0 will shape new forms of industrial parks, and managed industrial parks are the preferred choice. There is relatively low incoming supply and yields are relatively more attractive as investment assets,” said Sulaiman. 

The consultancy noted that despite having decreased by 29.8% and 11.1% in volume and value of transactions respectively in the first three quarters of 2020, the industrial sector was still seen to be the more stable sector. This is boosted by the overwhelming demand for e-commerce transactions, which will continue to hold the spotlight moving forward. 

Also, considering the slower relative pace of incoming supply, especially for managed industrial parks with built-to-suit arrangements, industrial property investments are to be keenly observed this year. 

The pandemic has stunted GDP growth but Rahim & Co maintained a resilient outlook for the coming years, as the world gradually readjust itself. 

In end-2020, the GDP growth was forecasted to contract by 4.5% but with the production of vaccines and having survived the initial pandemic shock, 2021 held a better recovery forecast of 6.5% to 7.5%. 

“However, the numbers are due to the low base in 2020. The projected growth may look encouraging but because of the drop in 2020, the absolute figure is still comparable to pre-2019 levels,” said Sulaiman. 

As of 3Q2020, the overall property market transactions fell by 15.8% and 21.6% in volume and value respectively, compared with the same period in 2019. It stood at 204,721 units, worth RM80.71 billion. 

Rahim & Co noted that the residential sector saw a decline in the first nine months of 2020 by 14.3% in volume and 14.8% in value, in spite of a better year-on-year performance in the third quarter, when the country entered the Recovery Movement Control Order (RMCO) phase.

“Progress in housing developments were disrupted and ultimately caused delays in completion targets, resulting in completion numbers to be 33.4% lower (at 64,080 units) than the previous period. In addition, overhang numbers had also grown by 14.8% to 57,390 units worth RM42.49 billion of dwelling units (residential, serviced apartment and SOHO combined). While this may be due to the pandemic's effect, the persisting overhang numbers is evident of a problem that is yet to be tackled effectively,” it said. 

According to director Choy Yue Kwong: “Unless we get to the root cause [of the overhang], we will never solve this problem. Right now, more properties are being built. An in-depth study should be done and permanent solutions to solve this issue should be looked at.”

For executive chairman Tan Sri Abdul Rahim Abdul Rahman, he said: “According to statistics, there is still a shortage of about one million houses in Malaysia. So I believe there is mismatch in pricing and type of housing. A problem is that land is a state matter, so every state should look at the availability of affordable housing and its problems.” 

The office market saw effective occupancy rates decline, especially during the MCO phase, as remote working became the norm. 

CEO of Estate Agency Siva Shanker highlighted that: “The occupancy rate is now at around the 70% bracket, which I think is probably the lowest we have seen in a long time. Remote working is expected to add further pressure on office space but the saving grace is that there has been no exodus in the market. 

“As supply exceeds demand, there will be some pressure on the rents, but I don’t believe we will see a crash in rents. As the vaccine rollout begins, I think remote working will reduce and people will start coming back to the office; office space will still have a role to play,” he added.

The pandemic aside, pre-existing problems from affordability, oversupply and income levels to cost of living remains. They need to be solved and tackled effectively and holistically, to ensure the long-term sustainability of the nation's property market, Rahim & Co said.

Edited ByWong King Wai
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