Why Malaysian real estate will be a good investment post Covid-19 in 2021? – Mr. Vee

The country is expecting to see an increase in foreign purchases in the next 12 months

After some nine months into the Covid-19 pandemic, it has become painfully clear that many industries in Malaysia have been severely affected by the outbreak. The property sector is no exception. It has taken a hard hit, with consumption sentiment wearying and regional tourism experiencing a considerable slowdown.

Before COVID-19 restricted international travelling, there was an influx of interest in Malaysian properties by foreign property investors with the emergence of some bargain hunting opportunities in Malaysia’s soft property market.

Since 2002, Malaysia has been a top destination for many affluent foreign property investors, especially those from China. Foreigners love the country’s diverse culture, the year-round warm climate, the friendly people, and its food. Malaysian cuisine is often cited as the reason tourists visit the country repeatedly.

According to Juwai IQI’s data, based on buying enquiries made by Chinese property buyers in over 90 countries, Malaysia ranked 7th in the third quarter of this year amongst the world’s most preferred destination by Chinese property buyers, ahead of & Greece, Germany and the Philippines which placed 8th, 9th and 10th, respectively.

Current state of Malaysia’s property sector

Before COVID-19,  Malaysia’s real estate market has been recovering, since the third quarter of 2018, from more than two years of price correction, according to a Juwai IQI’s report – Malaysia: A Cross-Border Buyer’s Guide – which was released in March this year. The report revealed that investor confidence was positive and transaction volume had risen. Home prices had bottomed out. National average home prices rose 0.9 per cent year on year in the second quarter of 2019 and transaction volume and value grew 6.1 per cent and 9.5 per cent from a year ago, respectively, in the first half of 2019.1

However, since the onslaught of COVID-19, the real estate sector has been hobbling. The country’s partial lockdown has delayed property listings and stalled processes like completing documentation and progress payments as financial institutions scaled down operations. Developers and builders are also unlikely to meet their completion deadlines as supply chains have been interrupted.

With the dependence on foreign buyers to help clear the property overhang which has been plaguing the country, there is cause for concern. Property agents say overseas investors have to postpone site visits until further notice due to border closures.

In Juwai IQI’s Property Survey and Index Malaysia Q3 2020, the report highlighted issues faced by the property sector:

  • COVID-19 is expected to push down residential prices by -4.8 per cent over the next 12 months before climbing again to post 10.6 per cent growth over the next two years. States with the strongest forecast price growth over the next two years are Penang and Perak while Kuala Lumpur and Selangor are expected to experience the lowest forecast price growth. 
  • Expectations of foreign buyer transaction growth are expected to be significantly lower in the coming 12 months. Home transactions by foreign buyers are expected to fall by -7 per cent.  
  • The foreign buyer outlook is highest in Penang where 43 per cent of industry respondents expect an increase in foreign buyer transactions over the next 12 months.

How are agents and developers coping

With customers unable or reluctant to leave their countries, sellers have shifted the emphasis to online marketing including livestreaming of seminars, more virtual tours and use of social media platforms to promote their offerings.

At present, many developers are engaging local and overseas agencies, along with a series of digital marketing initiatives to market their products to continue to leverage the interest shown by foreign buyers. For example, prospective buyers can use VR (virtual reality) to tour showrooms or destinations from the comfort of their computer or mobile phones.

Chinese enquiries about Malaysian real estate saw a V-shape trend between Q1 and Q3 this year, according to Juwai IQI’s data. This could suggest that perhaps online promotions are working. Enquiries plunged by -30.2 per cent from Q1 to Q2 and then pivot upwards by +57.3 per cent from Q2 to Q3.

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