Younger Home Seekers and Investors Keen on Property Post-COVID-19

First-time home seekers and investors are prioritising property as Malaysia enters the recovery stage in the government’s 6-Phase Plan against the COVID-19 pandemic, according to PropertyGuru in its Malaysia Consumer Sentiment Study H2 2020 report.

While the national Property Sentiment Index fell from 42 index points in H1 2020 to 39 in H2 2020, young renters aged 22 to 29 years old are least likely to delay their property purchasing decisions. This is coupled with greater intent to purchase by investors, who are more likely to time their purchases according to price and market movements.

However, awareness and uptake of alternative financing programmes and digital tools have ample room to grow, despite the fact that Malaysians cite home loan financing, property viewings and information sourcing as key challenges in the property decision-making process.

Movement controls spur home ownership aspirations

“We’ve seen a lot of market uncertainty in the wake of COVID-19 and the resulting Movement Control Orders (MCOs) in Malaysia, with numerous viewpoints, models and strategies from industry players trying to make sense of the pandemic and its impact on property,” says Sheldon Fernandez, Country Manager, PropertyGuru Malaysia.

“Looking purely at consumer sentiment, however, some patterns are clear. One of these is that extended, enforced time at home has perhaps made renters and younger home seekers more appreciative of the benefits of owning their own property. Another is that investors are on the lookout for purchases, though these demographics differ in their approach to purchase timing.”

Source: PropertyGuru Analytics

The recent study showed that 51% of renters and 47% of respondents from 22 to 29 years of age say they would not delay property transactions due to COVID-19 and its impacts. This compares to 23% of respondents aged 60 and above, underscoring the importance of home ownership to younger groups.

Respondents from lower income backgrounds are also less likely to delay their purchases, indicating continuing demand for affordable housing amid economic headwinds.

Source: PropertyGuru Analytics

Rise in investor appetite, subject to price and market movements

Overall, more Malaysians are citing intention to purchase for investment purposes post-COVID-19, increasing from 47% of respondents in H1 2020 to 53% in H2 2020. Despite this increase in purchasing intent, investors are most likely to delay property purchasing decisions in the short term among demographics surveyed. This can be attributed to their need to maximise returns, with purchase timing subject to projected price and market movements.

“The current market scenario has unprecedented uncertainties, not only in Malaysia but also globally. Property market stakeholders are conscious of such uncertainties, besides the potential negative impact on property prices which has impeded decisions related to property dealings, be it purchase, sale or development. This situation could be evident during the entire moratorium period for loans which ends in September, and subsequent to which the market should have greater clarity,” says Prem Kumar, Executive Director, Jones Lang Wootton.

His views are supported by PropertyGuru Malaysia Consumer Sentiment Study findings, which found healthy demand remaining in H2 2020 with 37% of respondents citing purchasing intent by year-end, and only a slim majority (57%) prefer purchases in 2021. In fact, fewer than one out of five Malaysians (16%) shared that they are not considering property purchases following the pandemic.

This optimism is even more pronounced in the long term, with just 8% of investors sharing they would defer property buying decisions by three to five years in the event of a recession. However, Prem recommends adequate due diligence to be exercised by deal seekers to mitigate the risks posed by the uncharted headwinds affecting the market.

“The COVID-19 outbreak has accelerated the impact of structural issues which were already being faced by the property market. As such, it is not just a matter of managing the short-term market uncertainties, and it should be kept in mind that other non-real estate factors have a bearing on the market as well. Property investors need to be wary of relying on traditional investor instincts which may not necessarily provide adequate credence in terms of decision-making in the current unprecedented environment of the property market,” he says.

Room to improve: loan financing and uptake of digital tools

Aside from price uncertainty and delays in purchases, difficulties in viewing properties (52%) and challenges in securing home loans (41%) are the issues most frequently faced by Malaysians returning to a new normality. Though keen on property, renters (46%) and those living with parents (51%) are most likely to have difficulty finding loans. Inability to obtain sufficient information on property (29%) is also a common concern.

“Financing and affordability will naturally come under scrutiny as many Malaysians prioritise day-to-day survival in the face of a potential recession. For those with sufficient buffers to capitalise on current market trends, however, there is still room to improve in terms of uptake for programmes and tools developed to address these specific use cases, such as affordable housing and rent-to-own schemes, loan pre-approval solutions and virtual tours,” says Fernandez.

“Previous PropertyGuru research has shown that uptake of affordable housing programmes is low, with participation rates as little as 4% among respondents. In addition, few people are fully leveraging on digital tools as yet, but this number is growing and we anticipate a wider industry shift to such tools as a result of COVID-19. Hence, PropertyGuru has created more virtual tour experiences for users to cater for this trend, with more to come.”

The study also found that only 26% of respondents would refinance their home loans, despite a historically low Overnight Policy Rate (OPR) following a series of revisions by Bank Negara Malaysia and the possibility of greater cash liquidity for approved applicants.

This suggests that Malaysians are largely comfortable and confident with their existing financing arrangements, with a view to reducing associated costs such as valuation charges, legal fees and stamp duty, for wider uptake of refinancing solutions.