Property: What will 2018 be like?

Property: What will 2018 be like?
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HAPPY New Year! Let’s be honest. 2017 was nothing to shout about. For the Malaysian real estate industry, in particular, the numbers that emerged were concerning, to say the least. So hopes are up that 2018 will be better.

And when Bank Negara Malaysia sounds alarm bells, everyone should take heed. The central bank had highlighted that the number of unsold residential properties in the country as of the first quarter of 2017 was the highest ever recorded in a decade. Then came the freeze on office, shopping mall and residential high-rise properties priced RM1 million and above. That certainly added to the already negative market sentiment.

But let’s hear it from the horses’ mouths. What do industry players have to say about the real estate market in the year that was and what do they think 2018 will augur for the market?

We asked 16 property consultants and developers to sum up the year in one word and what they foresee the new year would bring.

Not surprising that most of them think we should brace for another challenging year, what with interest rates said to rise and with the national general elections lurking around the corner. Others were more positive, expecting things to pick up before the year is out. Well, up or down, let’s all just hope for the best!

Firdaus Musa (Firdaus & Associates Property Professionals managing director)
The word for 2017: Mid-down-cycle

The market in 2017 was a gradual down-cycle of activity with lower volume in transactions, due to the more transparent credit scoring by banks, lower finance margins and mismatch in property supply and demand. The down-cycle of the market started four years ago and we are halfway through the downturn already.

Despite this, the strengthening of the economy with good yearly growth, good export figures and lower non-performing property loans indicate that funds are still available and the property market is still resilient, albeit with a slight correction.

2018 outlook

In the immediate years to come, I can foresee that there would be more opportunities for product differentiation, sensitive analysis of prices, less speculation, greater absorption of the current overhang properties and a more moderate increase in property prices, complementing a more realistic demand.

Datuk Chang Khim Wah (Eco World Development Group Bhd president and CEO)
The word for 2017: Challenging

2017 was challenging but we still managed to achieve our sales target of RM4 billion. For that, we have to thank all our customers for continuing to believe in the EcoWorld brand.

Over the course of the last 12 to 15 months, we have handed over close to 5,000 units of properties. In 2018, we will hand over approximately another 5,000 units. Our developments are not only beautiful showpieces but will soon have vibrant communities living and working there.

2018 outlook

We are therefore confident that 2018 will be another good year for EcoWorld as we work hard to innovate, add even more value to all our projects and discover new ways to better serve and engage with our existing and prospective customers.

Datuk Beh Huck Lee (Eupe Corp Bhd group managing director)
The word for 2017: Breakthrough

In 2017, we’ve seen new risks and uncertainties emerging, both globally and closer to home. These uncertainties have impacted the property market with buyers being more cautious and discerning.

But risks also mean opportunity. Bear traps and bull traps are very common before the market trends upwards or downwards.

We see 2017 as a year of opportunity. Everyone must commit to changes to bring about breakthroughs in a way that produce results, for this is an entirely new world.

2018 outlook

The market is taking longer than expected to swing into an upturn, so I expect the period of consolidation to continue well into next year. However, we’ll continue to see segments of the market respond well to quality property products that stand out from the crowd but are priced reasonably.

I think 2018 will be an interesting year. We will probably not see a broad spectrum recovery across all segments and regions, but certain niche markets will start to bounce back, based on the level of resilience they have shown in the current market.

Datuk Ng Thien Phing (SkyWorld Development Sdn Bhd founder and group managing director)
The word for 2017: Selective

In 2017, we saw that the market had reflected selective demand as we observed that certain hot spots continue to do well. Property buyers are concerned with a project’s location and so prefer strategic locations with value-added services such as quality and innovative products.

2018 outlook

I believe the market in 2018 is promising. We would see growth in the second half of the year after the general elections.

Foo Gee Jen (CBRE|WTW managing director)
The word for 2017: New normal

“New normal” best describes the current Malaysian property market. It is increasingly clear that the uncertainty in the property market is fundamentally different from those experienced in previous periods of recession. We are experiencing not only another turn of business cycle but a restructuring of the economic order.

2018 outlook

The outlook for this year is still very foggy. For the residential property segment, affordable houses will continue to do well but high-end or shoebox units will experience a big correction, owing to large amounts of supply and the affordability issue.

In the commercial sector, older offices and retail malls will continue to experience decline in rental due to the oversupply and ageing properties.

With more developers repackaging their products towards more affordable housing, the momentum of sale is expected to improve, especially in the second half of 2018. Barring any unforeseen negative impacts, the property market is expected to see better prospects by 2019.

Ngan Chee Meng (Gamuda Land Sdn Bhd chief operating officer)
The word for 2017: Cautious

Though potential buyers tend to be more cautious with major investments such as properties, they are also well aware that property investment remains a good hedge against inflation as property value tends to increase over a period of time. We see value in properties that are strategically located, with good master plan and well supported by good infrastructure.

2018 outlook

The outlook remains positive as the Malaysian economy continues to experience sustained growth. The World Bank has revised Malaysia’s 2017 GDP growth forecast upwards for the second time this year to 5.2%, primarily attributed to stronger investments and the recovery in world trade.

We have also seen lower unemployment rate in the country at 3.4% as of April 2017, according to the Department of Statistics Malaysia. The unemployment rate is relatively low and stable at around 3%, indicating that the population is experiencing close to full employment.

Improved rail connectivity within the Klang Valley will increase demand for mid-priced range properties located on the outskirts of Kuala Lumpur.

Tan Sri Leong Hoy Kum (Mah Sing Group Bhd managing director)
The word for 2017: Affordable

The Malaysian property market in 2017 was focused on affordable developments. The market was hungry for affordably-priced homes with good product specifications in strategic locations that are near the city centre and public infrastructure such as the mass rapid transit and light rail transit.

2018 outlook

We concur with the Real Estate and Housing Developers’ Association which said they are optimistic about Malaysia’s property sector outlook in 1H18, in tandem with the improvements of the country’s economic conditions.

Long-term demand will continue to be strong for property buyers who are buying to own or for long-term investment, while in the mid and near term, the property industry is expected to be healthy, supported by the young demographic, growing population and low unemployment rate.

Sarena Cheah (Sunway Bhd managing director of property division for Malaysia and Singapore)
The word for 2017: Consolidation

Consolidating is healthy for the industry over a longer term.

2018 outlook

For 2018, we believe that there will still be demand for well-located properties on the back of healthy GDP growth numbers.

The economy has shown improvement in the last few quarters. Economic growth remains positive and the ringgit is also expected to be recovering against most currencies. We are confident that the economic growth will be sustainable. We expect an improvement in the property market post-elections, which we anticipate would sustain into the second half of the year.

Eugene Khoo (Ayer Holdings Bhd (formerly known as TAHPS Group Bhd) group CEO)
The word for 2017: Consolidation

The market was trying to find an equilibrium and developers were rethinking their strategies to take into account market sentiment and authority requirements.

2018 outlook

I think the word for 2018 would be “confidence” as I expect confidence to return and purchasers to transact. There is still demand and many people have been holding back their spending in 2017.

Adzman Shah Mohd Ariffin (Exastrata Solutions Sdn Bhd CEO and chief real estate consultant)
The word for 2017: Ambivalence

I think the word to summarise the property market in 2017 is ambivalent. The property market was on a roller coaster ride through the year.

The past 12 months were a mixture of downsides and upsides — rather an “ambivalent” experience, in my opinion.

2018 outlook

Moving forward into 2018, I expect it to be the year of reckoning since the general elections will be held presumably in the first half of the year. The general sentiment in the first half will generally be cautious in view of the elections, but will improve positively once the elections are over and there is certainty in political direction.

I also expect the developers will be reviewing their development plans to include affordable property components. Developers will also start to plan strata developments carefully in order to avoid difficulties in management at a later stage upon completion with more public awareness for buyers of strata properties. Unit size may start to be smaller but at a higher price psf.

Y Y Lau (JLL Property Services (M) Sdn Bhd country head and managing director)
The word for 2017: Confusing

“Confusing” best describes the property market in 2017. The market has not gotten worse and there was some glimmer of hope that things could be improving as we noticed that landlords were asking for higher rentals and capital values.

2018 outlook

We hope 2018 will do better, especially since the announcement of the freeze by the government on development of properties that are in excess supply. The uncertainty on how the freeze will be implemented could help to delay future projects that have yet to be submitted from going ahead and aid in the absorption of existing vacancies. The government has also relented on the 1% increase in stamp duty for properties above RM1 million to help reduce the overhang in properties.

Samuel Tan (KGV International Property Consultants executive director)
The word for 2017: Challenging

The property industry was challenging last year because of the multiple “assaults” that it experienced such as the impact of the overall soft economy and lowered purchasing power of potential purchasers, mismatch in demand and supply, the overhang and unsold units, the changing shopping trend and the emergence of e-commerce.

2018 outlook

While it will still remain challenging, I believe there will be more creativity in the property market in 2018 such as rent-to-own schemes, while the authorities will be keen to craft policies that will meet the housing needs of the B40 and M40 income groups. Meanwhile, financial institutions will also introduce products that will be attractive yet without compromising their credit risks.

In view of the outlook this year, developers need to be aware of the different segments in the market. The T20 group will continue to have appetite for high-end and good concept housing while the M40 group in major towns will be keen to own landed houses up to RM600,000.

Shops will be attractive only in selective locations where there is a potentially strong tenant market or where the business potential is high.

Eddy Wong (Nawawi Tie Leung Property Consultants Sdn Bhd managing director)
Word to describe 2017: Challenging

Why? A combination of property prices generally above the affordability level of the average household with the tight credit situation and huge property supply coming on-stream.

2018 outlook

The market is likely to remain challenging. The factors that affect the market in 2017 are unlikely to change. We have an additional factor — the general elections that is expected to be held in the first quarter of 2018. There is also the expectations that interest rates will rise. This will further affect the affordability level of households.

Sarkunan Subramaniam (Knight Frank Malaysia managing director)
The word for 2017: Sluggish

The market has remained subdued with sluggish market activity. Developers are offering many incentives to offload unsold units while potential buyers and investors adopt a wait-and-see approach, hoping for a recovery of the property market and overall economy.

2018 outlook

Amid the prolonged slowdown in the Kuala Lumpur and Selangor high-end condominium market, impacted by the slew of local cooling measures as well as China’s curb on capital flight, we will see more developers diversifying their target market to other overseas countries such as Indonesia, Singapore, Taiwan and Hong Kong to boost sales.

Whilst the development freeze by the government (on office buildings, malls and high-end high-rise residential property of over RM1 million) is expected to bring some longer-term relief to landlords of newly completed office buildings that have yet to achieve significant occupancy levels, it is not expected to correct the oversupply situation in the short to medium term, as there is high incoming supply from ongoing and upcoming mega developments versus weak absorption in the market.

Previndran Singhe (Zerin Properties CEO)
The word for 2017: Sentiment

In 2017, Malaysia property market’s fundamentals are good and it was sentiments that were affecting buyers’ property purchase decisions.

2018 outlook

On the property market for 2018, I believe there will be improvement of sentiments. The overall sentiments will be more positive due to strong fundamentals. However, I expect the overall property market could be flat.

To remain relevant and competitive in a challenging tenant-favoured office market, we are seeing more dated buildings undergoing redevelopment to match the needs of the market.

Tang Chee Meng (Henry Butcher Malaysia Sdn Bhd chief operating officer)
The word for 2017: Sluggish

The Malaysian property market has remained sluggish and uninspiring but generally stable. Developers had to offer more incentives to attract buyers and had to give out higher commission rates to agents to help them sell their projects.

Take-up rates were also generally sluggish, although some bright spots were noted in some projects located in popular locations.

In the secondary market, sellers were more realistic in setting asking prices and were more willing to negotiate.

2018 outlook

Based on the National Property Information Centre’s statistics, sales performance of new launches in 1H17 was actually better than the corresponding period the previous year. We are of the view that the current sluggish market conditions will persist in 2018 but the market is in no imminent danger of crashing.

This story first appeared in EdgeProp.my pullout on Jan 5, 2018. Download EdgeProp.my pullout here for free.