A BETTER 2019 AFTER ‘RESTRUCTURING’

Category: Swhengtee Article Published: Tuesday, 18 December 2018 16:06

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Dato Sri Gavin Tee gives his forecast of the Malaysian property market in 2019.

2019 is a very difficult year to do a forecast due to the many changes effected by the new government, some of which have been introduced during the 2019 Budget. The situation has changed so much to the extent that it has effectively reset the property market.

Malaysia now has a new group of leaders in government and even in the private sector. The economic model and direction have changed, and so have the international relations and foreign partnerships.

However, we just need to focus on identifying the problems and opportunities in order to ride out this period of change.

There are 2 major issues besetting the market now:

a. Oversupply

It’s too simplistic to think that there is an oversupply in all segments in the entire country. The fact is there is an oversupply in some segments in some parts of the country.

This is mainly due to a lot of high volume, high density projects having been approved in some parts of Malaysia since the last few years. As a result, the oversupply exists only in a few areas where there is very high supply but in general, there is no oversupply. Furthermore, the said oversupply occurs only in certain types of property such as shopping centres and high end condominiums.

This oversupply is countered or balanced out by the economic restructuring and social and market reforms which include the digital revolution and infrastructure changes. This has created a lot of rising stars in terms of new hotspots and new markets.

For example, the following sectors are doing very well: logistics and warehousing in the southern part of Kuala Lumpur; hotels in tourism hotspots like Bukit Bintang; Sabah serviced apartments or hotels; Pangkor’s new duty free areas and homestays; small commercial towns like Ipoh and Pangkor, as well as small towns in Sabah and Sarawak.

In 2019, I expect tourism in Melaka to do well as it is Visit Melaka Year while 2020 is designated as Malaysia-China Cultural Tourism Year. I expect the commercial sector including heritage shophouses to do well as well as homestays in the countryside which I foresee will have a bright future.

Low medium cost property will still be in demand but potential buyers will still face financing problems. I am not sure if P2P can help. On the other hand, medium cost properties will do better due to the better financial standing of the buyers.

b. Financing

The global financial market, among other factors, will determine our financial health in 2019. I expect the banking sector and the government to continue to show support in 3 key industries – agriculture, tourism and SMI/SME. Therefore, properties related to these 3 sectors will have good prospects.

On the other hand, I doubt first time homebuyers will receive such good support from the banks despite the strong support shown by the government. I expect some new guidelines on end financing will be introduced in 2019.

On a separate note, the government should also look into the financing issues faced in thesecondary market.

A BETTER 2H 2019

In the 1st half of 2019, I forecast that there will be a lot of Foreign Direct Investments and announcements of major contracts and mega projects. The effects will be felt more in 3Q when these help stimulate the market.

The first areas to experience an uplift will be very prime areas like the KLCC which will see more transactions in the 2H or 2020.

In the first quarter, the government will also be more involved in the property market with more announcements being made and policies being fine- tuned, for example the implementation of some of the Budget 2019 proposals such as P2P, rent to own, etc.

These measures may be positive or negative depending on the economic situation, how receptive the public are and how effective the implementation is.

In 2H, the investment direction will be clearer as the dust settles on all the new measures.

Meanwhile, as a result of less supply due to the delay in launches of new developments arising from the tightening of development orders and approvals as well as world economic upheavals, the supply will be reduced in 2020 compared to now. Older developments might still be launched but these will happen to a lesser extent.

In conclusion, I foresee better prospects in 2H 2019 and 2020 when there will be more movement in prime city centre areas, new mega project sites and tourism related properties.

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