Does COVID-19 ruins Malaysia’s property market
COVID-19 ruins Malaysia’s property market; experts find new hope amid the pandemic
With almost 7,000 active coronavirus disease (COVID-19) cases recorded as of May 18, the Malaysian government admits that the fight to defeat the COVID-19 pandemic is far from over- and according to experts, the country’s real estate industry is the hardest hit.
Teh Young Khean, Knight Frank Malaysia’s executive director of corporate services, confirmed that Malaysia’s real estate industry is currently in bad shape after the national government implemented the country’s Movement Control Order (MCO) last March 18 employing bold quarantine protocols and community restrictions to contain the deadly virus which killed 315,000 people around the world as of the press time. Teh Young said that the MCO obliged real estate companies to switch to the remote or work-from-home arrangement and concentrate less on physical operations.
Due to the drastic changes that real estate companies need to adapt to continue their operations, Knight Frank Malaysia- the world’s leading independent real estate consultancy firm, is projecting a major blow in the commercial office leasing and investment activities in the entire Malaysian peninsula.
According to Teh Young, this unfortunate scenario will affect both local and international real estate investors’ decision whether they will continue to engage in real estate business amid the COVID-19 pandemic or to take a break until the end of the onslaught of the coronavirus.
The executive director also told the press that majority of the real estate investors and brokers are experiencing low morale right now as the country, just like the other places in the world, is cramming and stumbling to contain the deadly virus that first caused havoc in Wuhan, China in the latter part of December 2019. “Business sentiment is at its lowest level, with many operations severely impacted by the outbreak. The sense of uncertainty will lead to slower demand as businesses and occupiers will likely continue to postpone major expansion or relocation decisions,” he stressed.
Despite the global economic bog down caused by the COVID-9 pandemic, Teh Young is optimistic that the moment a vaccine is discovered and made available to the public, the trust and confidence of local and multinational investors to engage in real estate business in Malaysia will eventually go back to its peak. He even added that after the pandemic, the co-working space business is a good catch for real estate newbies before they venture to large-scale investments.
Retail, aviation, hospitality, and tourism also fight for survival
Aside from the real estate, the COVID-19 pandemic also lambasted Malaysia’s retail, aviation, hospitality, and tourism industries.
After the country confirmed its first COVID-19 infection mid of January, the government immediately barred the entry of foreigners, especially those who will come from China’s Hubei province. This measure crippled the country’s hospitality, tourism, and aviation sectors and a lot of small and medium retailers immediately contemplated to closing their respective businesses trying to skip a dreadful financial setback.
Ben Ooi, associate director of Knight Frank Malaysia, admitted that right at the outset of the pandemic, they received overwhelming queries from retailers asking on how are they going to survive in this health crisis that’s seemingly crashing their businesses to dust. The Knight Frank Malaysia’s top gun disclosed that the majority of the retailers in the country has been experiencing significant sales loss since January and even if the MCO has been lifted after three extensions last May 12, some of the retailers still opted to stop their operations as they cannot anymore shoulder the operating costs of their business.
Since a considerable number of retailers chose to close their businesses, Ben Ooi warned the mall owners. He said that because a lot of retailers withdraw their tenancy contacts, this will have a direct impact on the supply chain and cash flow of the malls that will challenge their financial sustainability.
While it is true that some retailers opted to stop their business, Ben Ooi stressed that there are lots of reasons why retailers must continue their business amid the pandemic. He said that retailers would benefit much on the assistance given by some landlords and mall owners who waived asking for rental fees for a couple of months and even provided rebates to help local retailers.
Malaysia’s commercial investment will become unstable for a while- business consultancy expert
No less than James Buckley, Knight Frank Malaysia’s executive director of capital markets, projected that because of the economic instability caused by the COVID-19, the country’s commercial investment would remain at a low margin for a while. He pointed out that because the profit recycling process has been compromised due to frail economic engagements, investors are more hesitant to engage in any form of business as long as the coronavirus pandemic still brings ravage to humanity. “With the reduced leasing and investment activity, commercial office and retail rents will be further under-pressure. In the short term, investment transactions will be limited as viewings are not happening,” Buckley reiterated.
Buckley also shared the feedback he got from foreign investors who became skeptical about the actual valuation price of some real estate properties in Malaysia. This is due to some reports citing that the majority of the listed real estate prices in Malaysia do not indicate the actual value of the property considering the country’s perceived risk of the COVID-19 pandemic. He said that because of the trust issues and uncertainty brought out by the COVID-19, there would be a major gap or discrepancy between sellers’ and the buyers’ expectations. Despite this, Buckley remains to be positive and hope that those kind-hearted and motivated sellers would reduce the price of their properties to encourage an influx of foreign investors and help Malaysia get back to its prime foot and ultimately defeat the COVID-19 the soonest possible time.
COVID-19 alters crucial real estate transactions
According Sources from NST Sarkunan Subramaniam, Knight Frank Malaysia managing director, the COVID-19 pandemic greatly affected all phases of real estate transactions. He said that the MCO made it even harder for investors to mobilize and seal a deal with top-rated real estate sellers. Among the crucial real estate transactions and processes that suffered a lot due to the pandemic include the on-site property transaction, conducting title searches and verification, and holding of property viewings.
Subramaniam said that due to the coronavirus scare, both sellers and buyers prefer to stay at home for a while until such time that it is safer to go outside. He emphasized that this status quo is the very reason why the country’s real estate industry is having a hard time recovering from the damages brought by the COVID-19. And despite the fact that there is no more MCO imposed anywhere in the peninsula, Subramaniam said that the threat of the COVOD-19 is still present. He added that while it’s true that people can gradually embrace the ‘new normal’ schemes and always apply the international minimum health protocols to avoid the disease, saving the country’s real estate industry will require more time.
Pandemic’s positive side is seen in the logistics industry
Allan Sim, Knight Frank Malaysia’s executive director of capital markets, shed hope to all logistics firms as he gave an assurance that this kind of business will thrive even amid the pandemic. He said that due to the alteration of the market supply chain, this would pave the way for the decentralization of the logistics players and opening up of more regional logistics operations covering far-flung areas to support the seamless flow of essential goods and services. “In a domestic context, distribution hubs in Klang Valley are traditionally used by logistic players to serve nationwide deliveries. Similarly, on a global front, manufacturers may also start locating last-mile assembly plants in multiple countries or regions in order to mitigate any geographical risks that may disrupt supply chains,” Sim told the press.
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