With the property industry yet to experience a significant recovery since the first wave of COVID-19 cases, property prices in Malaysia may have already reached rock-bottom due to the multiple Movement Control Orders (MCOs) implemented by the government.
Centre for Market Education fellow and Bait Al Amanah economist Fariq Sazuki said property prices can no longer be lowered by developers during MCO 3.0 since the prices also reflect the rising costs of building materials and labour, reported The Malaysian Reserve (TMR).
The hike in costs is attributed to the pandemic, disruptions in the construction supply chain and time extension.
“In other words, the current property prices might have adjusted to the pandemic, where developers are more well-prepared of the impacts of the past MCOs,” he told TMR in a phone interview.
“Besides that, MCO 3.0 is no stricter than the first MCO, meaning that the additional impacts of MCO 3.0 on the supply side are quite minimal except for the rising costs.”
Fariq, however, still sees uncertainty surrounding MCO 3.0 from the demand side.
He noted that while the property market is believed to have recovered due to the low Overnight Policy Rate of 1.75%, the change in demand for properties could be ambiguous but skewed towards the rich.
Specifically, low-income earners are expected to use the extra savings from paying loans on essential household expenditures, while rich persons would likely take advantage of the low interest rates to acquire more properties, pushing up prices.
“However, this situation may only happen at hot spot areas such as Kuala Lumpur, where the demand for properties remains intact even with the pandemic,” said Fariq.
“Properties in other areas such as Iskandar Malaysia may continue to face unfavourable fates for a long time.”
He also underscored the lack of evidence supporting the view that the vaccination process would help in the recovery of Malaysia’s property market, other than offering more secure meetings between potential buyers and developers.
James Wong, Managing Director of VPC Alliance (KL) Sdn Bhd, on the other hand, believes property prices may decline with the enforcement of MCO 3.0.
He expects the number of COVID-19 cases to further increase in the coming months, which could adversely affect the property market.
“With the implementation of MCO 3.0, the economy will suffer further with increasing unemployment, salary cuts and closing down of businesses…This will definitely affect the property market and further decline in transactions and property prices are expected in the coming months,” he told TMR.
The latest PropertyGuru Malaysia Property Market Index showed that overall asking prices for properties in Malaysia declined 0.84% quarter-on-quarter and 1.79% year-on-year during the first quarter of 2021.
Sheldon Fernandez, Country Manager of PropertyGuru Malaysia, attributed the drop in prices to buyers’ apprehension as they take on a wait-and-see stance due to the resurging cases of COVID-19 as well as the enforcement of MCO 2.0.
Given the economic uncertainties brought about by the pandemic, sentiment may remain cautious as the property market could witness fluctuating price trends over the coming months, he said.