The Henry Butcher Malaysia group is cautiously optimistic that the Malaysian property market will show firmer signs of recovery in 2022 as the Covid-19 pandemic appears to be under control.
The achievement of a vaccination rate of more than 79 per cent, as well as the transition to the provision of booster vaccines, will boost overall confidence and economic activity, ultimately benefiting the real estate market.
Almost all sectors of the economy are now operational, and people have adapted to the new normal of adhering to the government's standard operating procedure (SOPs).
Tang Chee Meng, chief operating officer of Henry Butcher Real Estate said the uncertain and unstable political situation, with the toppling of several state governments in recent months, remains a source of concern, until a more precise picture emerges.
"The political situation in the country will continue to be uncertain until the 15th General Election (GE15) is completed. In the meantime, investors will adopt a more cautious stance," he said.
According to Henry Butcher's latest annual report on the review and outlook for the Malaysian property market in 2022, the economy's continued recovery and lower unemployment rate will boost confidence and the residential market in 2022.
The focus of the residential market this year will remain on landed residential properties.
High-rise apartments priced between RM500,000 and RM500,000, as well as smaller units and niche high-end projects in good locations, will do well.
Tang believes that as some banks refocus on this market segment, interest in the secondary market will rise.
He said a new supply of higher-priced homes in good locations had created a void.
New marketing sales packages by developers and the end of the Home Ownership Campaign in 2020/21 are factors to watch in the residential property sector.
The HOC's tenure ended at the end of 2021, and there has been no indication that the government intends to extend it.
According to Tang, this may reduce buyer interest, particularly in early 2022, as developers restructure their marketing sales packages in search of the right mix to attract buyers.
He said that the primary market is performing better than the secondary market due to the incentives provided by developers and the government under the HOC, but this may change now that the HOC has expired.
"Some banks are refocusing on the secondary market because such home buyers are perceived to be financially better off and less likely to default," he said.
He said that as building material costs rise, developers will have to accept lower profit margins, and market conditions do not favour raising selling prices to offset the higher costs.
Another thing to keep an eye out for is the possibility of interest rate hikes in 2022.
Meanwhile, the creation of Vaccinated Travel Lanes (VTLs) and the reopening of international borders may entice foreign real estate investors to return.
Furthermore, home designs will evolve to address pandemic-related issues. This includes a more well-planned and equipped study area to make working from home more comfortable and more electrical power points and improved internet connectivity, including in common areas.
Other areas that are expected to gain popularity in the coming years include the use of touch-less technology such as automatic doors, voice-activated elevators, cellphone-controlled entry, hands-free light switches, curtains, and temperature controls, the implementation of controlled entry/exit points that can be manned with temperature screening or even some form of UV disinfecting device, and dedicated lockers/rooms for the temporary storage of parcels for later pick-up.
Office sector to remain under pressure
Concerns about an oversupply of office space in the Klang Valley, according to Tang, will continue to weigh on the office market in 2022, putting downward pressure on occupancy and rental rates.
A new hybrid style of working from home and office, which many major corporations have adopted, will reduce the need for office space.
According to Tang, the completion of several large-scale office projects over the next one to two years will exacerbate the oversupply situation.
He believes that the government's implementation of various economic stimulus programmes to help the economy recover will help increase demand for office space and stabilise occupancy and rental rates.
The recent pandemic has exacerbated the decline in demand for office space, which may lead to some developers shelving or deferring new office projects.
"This will help relieve the oversupply of office space, particularly in Kuala Lumpur," he said.
He also anticipates that, based on the lessons learned during the Covid-19 pandemic, new office buildings will adopt layouts, designs, and technologies designed to deal with any future pandemics.
"For the office sector to recover, there must be a sustainable recovery in the economy that can generate an increase in demand for office space or at the very least allow companies to maintain their current offices," he said.
According to him, the first nine months of 2021 saw an increase in foreign direct investment, which he believes will boost economic growth and benefit the office market.
The industrial market will continue to be driven by growth in the e-commerce sector, which has created a demand for distribution hubs, warehousing, and logistics facilities near densely populated areas and is served by a good highway network to allow for fast point-to-point delivery to consumers.
The MCO (movement control order) has resulted in a significant increase in online purchasing, particularly for groceries and food. Mature and desirable areas will continue to be popular among manufacturers and warehouse operators. There has also been an increase in interest in establishing data centres.
Tang believes that the emergence of more infectious and dangerous Covid-19 virus variants will hinder economic recovery and disrupt manufacturing activities.
The 12th Malaysia Plan, launched in October 2021, will give the industrial sector some focus and growth impetus, while the country's progress toward implementing the strategies developed for the Fourth Industrial Revolution (IR4.0) would positively impact the industrial property sector.
Further, almost all economic sectors had been allowed to open after the country entered phase 4 of the National Recovery Plan (NRP).
"The economic slowdown caused by the Covid-19 pandemic appears to have peaked, as restrictions in domestic and international markets have been eased even further. Inter-state travel is now permitted, and international borders are gradually reopening, with VTLs being established to allow easier entry into the country," he said.
Tang hopes the increase in FDI inflows, particularly in the manufacturing sector, and rising exports will translate into increased demand for industrial space/properties in the first nine months of 2021.