The past couple of years have been tough for all of us as the world continues to struggle against COVID-19. In response, Malaysia has instituted strict entrance and movement restrictions, including the Movement Control Order (MCO), that have been in effect since March 2020.
These limits created additional obstacles in the Malaysian property market’s operation. While the government has initiated incentives, with several focusing specifically to help the local’s property market, were they actually effective?
Sit tight as we review the impacts of the implementation of MCO on Malaysia’s property landscape.
What is Property Market?
Before we get started, here’s a brief explanation of the property market.
A vital subject one must know about the property market is that it’s inherently cyclical in nature, with highs and lows corresponding to the economic cycle.
An “expansion” entails an upward pressure on house prices, followed by a “recession” as the market reaches the bottom of the cycle, and then a “recovery” as the market prepares for its upcoming boom.
2020: A Look Back
The outbreak of the COVID-19 pandemic has resulted in an unprecedented period of uncertainty worldwide. That said, the Malaysian property market is no exception.
To curb the spread of the disease, the Malaysian government imposed the Movement Control Order (MCO) to restrict movement and gatherings nationwide. These restrictions affected business operations as households must “stay-at-home” for social distancing to reduce direct interactions.
Evidently, the premier reason behind our 2020 local market movement, or rather the lack of it, is the impact of the epidemic, as well as the limitations stemming from it.
Despite that, it’s significant to remember and appreciate Malaysia’s adaptability. We have seen this through the government’s quick-thinking policies coupled with the market players’ innovative evolution.
For example, the restoration of the Home Ownership Campaign (HOC), which includes a Real Property Gains Tax (RPGT) exemption, stamp duty exemption, and the abolition of the 70% margin of financing limit, were some of the government’s efforts to curtail the pandemic’s adverse effects.
In addition, a six-month loan repayment moratorium that began in April has assisted in keeping default rates in check. These actions were bolstered through the RM 35 billion short-term National Economic Recovery Plan (PENJANA). A series of Overnight Policy Rates (OCR) were also swiftly implemented.
Data and Statistics
Now, let’s delve a bit into numbers.
As recorded in Property Guru Malaysia’s Property Market Index Q3 2020, the general asking prices for Malaysia remained broadly consistent (+0.83% Quarter-on-Quarter [QoQ]) in Q2 2020, even during MCO. Consequently, the supply of available houses on the market has declined (-3.60% QoQ).
How MCO affects Malaysia’s property industry
- Short-term effects
During these trying times, customers will temporarily refrain from luxury purchases and focus on their necessities instead. Due to the ambiguity around the length of business closure, potential customers prefer to wait and see, resulting in a drop in average sales.
Furthermore, luxury properties aimed at foreign interests and investors have decreased considerably due to Malaysia’s international travel restrictions. This development will likely continue unless their prices are rearranged to cater for local customers.
- Long-term effects
Whereas the short-term impact of MCO is instantly apparent in the decline in property-related sales, the long-term effect is much more substantial, as it will inevitably influence and transform consumers’ lifestyles.
Currently, there’s a growing demand for properties not located in the heart of the city. Tenants are more interested in affordable yet spacious living with a vast network of highways alongside various amenities.
Must-Know Renting Tips and Trends!
As per today’s circumstances, landlords need to familiarise themselves with digital means. Since the rental market nowadays prefers virtual tour films and high-resolution pictures, it’s wise for landlords to include Zoom negotiations and virtual viewings.
Additionally, fully furnished houses are in demand as they are more noticeable online, making them extra attractive. Besides, to persuade new tenants, there should also be the option of refundable booking.
According to Sun Daily, Vincent Lim, the managing partner of Property Guys, asserts that landlords must be more accommodating and understand tenants’ financial challenges. For instance, those with financial flexibility may consider rebates or discounts.
It is tremendously critical for both sides (tenants and landlords) to retain professionalism at all times via honest communication. This is pivotal as an early contract termination will potentially result in an unfavourable outcome for both parties.
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