Press Release: Henry Butcher Malaysia Perspective 2021
DATE: 1 FEBRUARY 2021
PRESS STATEMENT ON THE RELEASE OF HENRY BUTCHER MALAYSIA PERSPECTIVE 2021
The Henry Butcher Malaysia group is pleased to present its annual report on the review and outlook for the Malaysian property market in 2021.
Mr Tang Chee Meng, the Chief Operating Officer of Henry Butcher Real Estate said “overall, the property market in 2021 is expected to be flattish or record a slightly better performance than 2020, as the start of the vaccination programme in the country would help in controlling the covid-19 pandemic and start the economy on a recovery path. However, with the recent rise in infections and the implementation of MCO 2.0 and the declaration of emergency, the hoped-for recovery may be delayed till 2022. He also presented the key highlights of the report:
• The overall situation is expected to continue to be challenging as the pandemic has yet to be brought under control and the political situation in the country is still full of uncertainties. In fact, MCO 2.0 has affected businesses and dampened investors’ and consumers’ confidence and this will delay the recovery of the market, if the MCO is prolonged.
• The positive thing to look out for is the rollout of the Covid-19 vaccination programme, expected to commence after receipt of the first batch of vaccines expected by end February. Once herd immunity is developed, the economy and consequently, the property market will be able to stage a sustained recovery. Further, buyers may take advantage of the current low interest rates to buy their dream homes and housing developers are expected to intensify their marketing efforts to push sales before HOC 2020 ends in June.
• The lockdown during the MCO has made property developers realise that they cannot depend on traditional methods of marketing alone and many, if not all developers, have added digital marketing tools and technology to their marketing arsenal. This will help them in the long run to reach out beyond the local market.
• Foreign investors may also return to the market once international borders are lifted. • The advent of the work from home culture has made internet connectivity as well as private work places within the home very important considerations in house design and new homes rolled out by developers from now on would likely place more emphasis on this aspect of home design.
• Landed residential properties are expected to remain in demand whilst the huge overhang of high-rise residences, especially serviced apartments, will make this segment of the market more challenging.
• More developers have re-focused their attention on affordable homes priced under RM500,000 and this market segment will continue to be the main focus in 2021. • The commencement / completion of various major infrastructure projects such as the EKVE (East Klang Valley Expressway) scheduled for completion in Q3 2021, the Rapid Transit System (RTS) as well as the Kulai Iskandar Data Exchange (Kidex) projects in Johor, the ECRL and the Pan Borneo Highway in East Malaysia will boost demand for properties located near the interchanges of the highways or within the vicinity of the developments.
• Even before the pandemic, the office sector in the Klang Valley was already experiencing some downward pressure on occupancy and rental rates due to the substantial new supply that has come on to the market over the past few years. The oversupply situation was exacerbated by the adverse impact of the pandemic and the ensuing lockdowns on the economy imposed by the government to curb the spread of the covid-19 virus. The government’s directive to companies to adopt work from home practices for their staff as well as business closures and the poor business outlook compounded the problem as this led to companies deferring expansion plans and an overall decline in demand for office space.
• The future completion of a number of mega office projects currently being built eg. Merdeka 118 by PNB and a few other private developments will add substantially to the supply of office space in Kuala Lumpur, putting additional pressure on overall occupancy and rental rates.
• The increase in vacancy rates of office buildings in the Klang Valley may however lead to some developers shelving or deferring their office developments and this will ease the pressure on the oversupply situation.
• The office market in smaller towns like Ipoh, Kota Bahru and Kuala Trengganu are however fairly stable due to limited supply of purpose-built office buildings and no or very little new supply coming onto the market.
• A total of eight new shopping centres and two mall extensions were opened in the Klang Valley in 2020, putting an additional nett floor area of more than 2.7 million sq. ft. onto the existing supply
• The retail sector in the Klang Valley will continue to see a shakeout where poorly designed and malls in inferior locations will be forced to close or be converted to some other alternative uses.
• New shopping centres will face challenges in filling up space and some may defer opening if they are unable to open at a satisfactory level of occupancy.
• Many retailers, unable to sustain operations during this difficult period, took the opportunity to close unprofitable outlets, downsize or stopped operating completely and this included venerable established names like Robinsons and Tangs.
• New malls with foreign retailers making their debut in Malaysia will offer shoppers new choices and different shopping experiences which will help to draw customers. • Some of the new retailers/restaurants opening in Kuala Lumpur are Taco Bell (Cyberjaya), Tom Ford (KLCC), Five Guys (Genting Highlands), David Rocco (Suria KLCC), Don Don Donki (Lot 10) etc
• The industrial sector was not spared by the pandemic as supply chain and production were disrupted by the SOPs implemented under the various phases of the movement control orders. All was however not doom and gloom as manufacturers of gloves, face masks, PPE equipment, health equipment and products benefitted from the increase in
demand for such products. Warehousing as well as logistics service providers also benefitted from the e-commerce boom experienced during the lockdowns. • Despite registering a decline in the volume and value of transactions, the industrial property sector was the best performing of all the property sectors.
• With the start of vaccination programmes in many countries, the pandemic may be brought under control and this will spark a revival of the global economy and benefit major exporting nations like Malaysia.
• The industrial property sector is expected to see a recovery in 2021
HOSPITALITY & LEISURE SECTOR
• The tourism sector was one of the most badly hit economic sectors as foreign tourists were not allowed into the country as part of the government’s efforts to fight the covid 19 pandemic. Domestic tourism also dried up during the period of the MCO when inter-district and inter-state travel were prohibited and only recovered when the travel restrictions were lifted under the CMCO and RMCO.
• Hotels and tourism dependent businesses were badly affected and many hotels either went on a cost cutting or retrenchment exercise or closed down completely. More than 200 hotel and tourism operators have shut down operations since march 2020.
• The cancellation of Visit Malaysia Year 2020 dealt a huge blow to the tourism industry • Until international borders are reopened and domestic travel restrictions are removed or at least relaxed, the hospitality sector is expected to continue to go through very tough times and will unlikely be able to see any sustained recovery in 2021
Mr Long Tian Chek, the founding partner and director of the Henry Butcher Malaysia group expressed his hope that the government will extend the HOC and continue to come up with additional measures to help the property industry tide through this difficult period and stage a sustainable recovery.
— End of Press Release —
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