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Worsening Covid-19 situation will derail property market recovery

January 19th, 2021 Leave a comment

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Last year had been extremely challenging for the overall market, including real estate, due to the prolonged Covid-19 pandemic and it continues to disrupt lives, economies, and societies globally.

Homebuyers and investors held on to their money due to the certainty in the market and because of that many developers registered a higher number of unsold properties.

Knight Frank Malaysia managing director, Sarkunan Subramaniam said the current worsening of the Covid-19 situation in the country is expected to derail the recovery in the property market as more developers push back their launches.

Sarkunan expects potential buyers and investors to likely postpone property purchases in the short-term as they adopt a wait-and-see approach.

He said the anticipated rollout of the Covid-19 vaccine is expected to boost hopes for a return to normalcy and will set the path for recovery of the global economy.

“The performance of the residential market is very much dependent on how the economy moves forward. The anticipated commercial rollout of the Covid-19 vaccine by 1H2021 will certainly boost the hopes for the country’s economic recovery and lift overall consumer sentiment. However, the current ongoing political uncertainties amid the worsening Covid-19 crisis has led property buyers as well as developers to rethink their future plans and strategies,” he said.

Sarkunan said these are reasons to believe that the residential market is expected to remain challenging in the first half of 2021.

Malaysia’s economy is expected to rebound in 2021 given the expected commercial rollout of the Covid-19 vaccine by the first half of this year (1H2021).

The government predicts that the economy will expand between 6.5 per cent and 7.5 per cent in 2021 driven by the anticipated improvement in global growth and international trade.

Sarkunan said post-Movement Control Order (MCO), selected developers have reportedly recorded improved bookings supported by the low-interest-rate environment and pent-up demand.

“The conversion of bookings into sales, however, has been more challenging due to stringent bank requirements,” he said in a statement that was issued following the launch of the firm’s latest research report, Real Estate Highlights 2nd Half of 2020, here, today.

Incentives to boost the market this year

Sarkunan said the re-introduction of the Home Ownership Campaign (HOC) in June 2020, coupled with several initiatives under the recently tabled Budget 2021 are expected to boost market activity – include a full stamp duty exemption on both instruments of transfer and loan agreement for the first home purchase worth up to RM500,000. The exemption is applicable for the sale and purchase agreement on purchases that are completed from January 1, 2021, until December 31, 2025.

Stamp duty exemptions on loan agreements and the transfer instrument for abandoned housing projects will be extended for another five years, also till December 31, 2025. The waiver of stamp duty will lower upfront cash payments and encourage home-ownership among the first-timers.

The proposed full stamp duty waiver complements the real property gains tax (RPGT) exemption as unveiled under the country’s Short-Term Economic Recovery Plan (PENJANA) in June 2020, whereby gains arising from disposing of residential property by Malaysians (limited to three units per individual), between June 1, 2020, and December 31, 2021, are exempted from RPGT. Sarkunan believes that collectively, these incentives are expected to spur more activities in the primary and secondary residential markets, further supported by the current low interest rate environment.

In addition to that, he expects the reduction in employee’s statutory contribution rate from 11 per cent to nine per cent effective 2021, will boost disposable income and ramp up domestic spending.

Moving forward, with lower-interest rates and higher disposable income, more potential purchasers who qualify for loans may be encouraged to start buying properties and this may provide some traction to the sluggish housing market, he said.

Source: NST Online

 

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