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Strong Property Sector Will Boost Economy

The government’s continuous efforts to promote home ownership, especially for first-time buyers will stimulate the property sector, and eventually will generate a larger impact on the wider economy. The introduction of the National Housing Policy and new initiatives will benefit house buyers and address the demand for affordable homes.
It is a known fact that the property market and the nation’s economy’s health go hand-in-hand, thus, most developers have been developing affordable-priced homes as part of their efforts to enable everyone to own a home.

For example, one of the well known property developers, the Mah Sing Group has embarked on its "Reinvent Affordability” campaign, covering four projects namely M Centura in Sentul, M Vertica in Cheras, M Vista in Penang and Fern phase 2 in Meridin East, Johor. Through this campaign, Mah Sing will continue to enhance the lives of its customers by developing accessible and well-planned products.

Currently, some of the major players want to position themselves as one of the  active contributors for the development of affordable homes for the nation. The government, on the other hand will consider several other measures, such as relaxing lending guidelines for housing loans. It has been challenging for the local property industry for the past few years, especially with the loan eligibility issues.
The government is working together with Bank Negara Malaysia on relaxing lending guidelines to enable more first-time buyers to secure housing loans, among others by providing higher margin of financing, longer loan tenure, lower interest rates, higher Debt Service Ratio and discounted MRTA (mortgage reducing term assurance) to ease home ownership for first-time home buyers.
The current exemption of 100% stamp duty for first property priced up to RM300,000 is a good move to lessen the burden of first-time buyers. It is hoped that the government will continue to exempt stamp duty expenses for first-time buyers and extend the incentives to affordable properties below RM500,000, taking into account the affordable prices in the main cities of Malaysia. For the record, this was a successful stimulator for property transactions in the past and would be an effective short-term catalyst to stimulate the industry.
In another development, in order to help reduce the unsold stocks in the market, most developers hope the government can start a campaign that involves the collaboration of all stakeholders, such as bankers, lawyers and developers, to come up with a strategic plan to encourage home ownership, especially for affordable houses.
As it is, the residential property market in Malaysia has been lacklustre since 2015 with annual declines in the volume and value of transactions, an increase in unsold houses and lower profits reported by some major developers.
Based on the latest available statistics released by the National Property Information Centre (NAPIC), the number of unsold completed residential units rose 48.35% to 30,115 units from 20,304 units year-on-year up to September 30 2018, while the total value of these unsold houses increased 56.44% to RM19.54 billion from RM12.49 billion.
These figures exclude serviced apartments and small-office-home-office (SoHo) units which, if added on, will increase the total unsold stock to 40,916 units worth a staggering RM27.38 billion.

Positive Measures to Stimulate the Property Market 

Residential - Post GE14, confidence levels have improved in the residential sector. In line with improving market sentiment, developers have become more optimistic thus more aggressive launches during the second half of 2018. In spite of the challenging market environment, market enquiries and activities have increased. In 2019, expect to see more motivated sellers and discerning buyers to be present in the residential market. Various policies announced in Budget 2019, which are designed to aid first-time homebuyers, are also expected to kick-start the housing market moving into 2019 and beyond. Malaysia’s residential properties will continue to be attractive in the eyes of foreign buyers as a result of our liberal policies, reasonable valuations and coupled with no extra stamp duties.
To address some of the prevailing issues affecting the residential property market, the 2019 Budget introduces some positive measures to stimulate the residential property market, particularly the affordable housing segment. Some of the measures include:
• Stamp duty exemption on the first RM300,000 on the sale and purchase agreement and loan agreement for first time purchasers of houses priced RM500,000 and below for a period of two years till end-2020.
• Six-month stamp duty exemption effective January 1 2019 for first-time buyers of units priced between RM300,000 and RM1 million.
• The launch of peer-to-peer (P2P) crowdfunding initiative to provide buyers an alternative source of funding to purchase a house. There is some degree of scepticism about this platform, and more details are needed on this programme to address the concerns of would-be house buyers as well as investors.
• A sum of RM1.5 billion will be set aside for the building of affordable homes targeted for the Bottom 40% (B40) group. The plan is to build 100,000 affordable homes per year, starting this year although judging from the government’s past track record, the figures seem unrealistic. Nevertheless, with the new administration and new people at the helm, it is not impossible to achieve this lofty target.
• A further sum of RM1 billion will be provided by Bank Negara Malaysia to help first-time buyers with monthly income of less than RM2,300 to finance the purchase of homes priced less than RM150,000 at a lower interest rate of 3.5%.
• An allocation of RM25 million by Cagamas will be used to provide mortgage guarantees for first-time buyers with monthly household income of less than RM5,000.
The latest good news is the announcement that all bank employees will enjoy 0% interest on their housing loans for the first RM100,000 of loan amount. This was included in the new collective agreement reached between Malaysian Commercial Banks Association and the National Union of Bank Employees. However, while the measures are good news for potential first-time house buyers, will it be enough to spur buying activity in the market and help developers clear their unsold stocks?

It is noted that in the 2019 Budget there are also some initiatives that may negatively impact the property market - the 5% Real Property Gain Tax (previously 0% for individuals and 5%  for companies and foreigners) imposed on properties sold after five years of ownership except for low- and medium cost and affordable homes of RM200,000 and below.

There is also an increase in the stamp duty rate for properties above RM1 million which means that it has become costlier to buy properties of such price. As a concession, the government has recently announced the deferment of the new higher tax rate for six months, which means that the new rate will only take effect from July 2019.

Industrial - Industrial properties are now moving towards sizeable scale and come with higher specifications. Good examples will be Area Logistics @ Ampang at Ulu Kelang Free Trade Zone and Century Logistics’ upcoming headquarters at Bandar Bukit Raja in Klang. On the other hand, manufacturing and logistics operators seek to centralise their operations and improve their business capacities. The government is also encouraging further development in Malaysia’s industrial property sector in selected strategic locations with focus on developing key industries such as the aerospace sector.

In 2019, expect higher level of land banking activities among industrial property developers. This is because strong latent demand continues to be omnipresent especially for industrial properties with high specifications, as occupiers understand the need to jump onto the Industry 4.0 bandwagon in order to future-proof their businesses. This presents a unique opportunity for developers and investors alike to gain attractive monetary returns by providing end-users with the right products.

Moving forward, the country will see new large-scale industrial developments taking shape in strategic locations due to robust demand for warehouses. For example, the proposed Free Trade Zone (FTZ) in Pulau Indah, which was recently unveiled by the government, is expected to generate interest from manufacturers and logistics operators alike. As for established industrial parks, potential clients will continue to see redevelopment of debilitated factories into multi-storey facilities as a mean to mitigate high land costs. All in all, Malaysia’s industrial property sector, which has been the silver lining for Malaysia’s subdued property market in recent years, is set to continue its resilience.

Office - The office market experienced no significant change in rental although certain sub-markets experienced slight decline in occupancy during the second half of 2018. In 2019, occupancies in selected sub-office office markets are expected to be under pressure due to heightened competition from impending and existing office stock while rentals will continue to hold steady as newer buildings tend to command higher rates. There will be active enquiries and leasing activities in the co-working and IT related segments. Also, an increasing number of older buildings are looking into repositioning and refurbishment to meet current occupier needs.

Retail - The three-month tax holiday period from June to August 2018 has pushed the consumer sentiment index (CSI) to a 21-year high of 132.9 points. Subsequently, while the CSI index has fallen after the 3-month tax holiday, it remains at an expansionary level beyond the 100 points. However, with supply continuing to outstrip demand, the retail market is expected to remain competitive.

As the retail market remains challenging, it can be observed that malls are taking proactive measures to create new experiences in order to remain relevant. For example, Fahrenheit 88 recently welcomed the country’s very first pop-up Selfie Museum to create a multi-sensorial experience that matches the contemporary "insta-worthy” trend. With modern shoppers becoming increasingly tech savvy, malls are now banking on the use of social media to attract more patrons.Vis-à-vis the implementation of The Goods and Services Tax (GST) back in 2015, the introduction of Sales and Service Tax (SST) did not significantly dampen consumer spending, with the CSI remaining at expansionary levels. This serves as a boon for the retail market amidst the current challenging environment. In 2019, lesser established and new malls without pre-committed take up will find it challenging to compete in this diluted market. Therefore, rental growth will likely be muted as retailers continue to be spoilt for choice.