Spotlight on Malaysia
Asian Property Review focuses on Malaysia as a wrap-up on its 2021 Review due to her double whammy of pandemic and political instability.
Text by Jan Yong
Malaysia is the most watched ASEAN country in 2021 not just for its chart topping Covid-19 numbers but for her political instability which sometimes borders on the absurd. Three prime ministers within three years is record-breaking although this has happened before in other countries.
What’s so infuriating for the majority of the population is the widespread perception that the politicians in Malaysia (with the exception of some) care more for their own political survival and enrichment than the life and death issues facing the people. The list of such instances is a long one – some (including the potentially explosive Pandora Papers expose) have been recorded for posterity in mainstream and social media but many more have yet to be uncovered.
Even after the Sabah state election in September 2020 which many believed triggered Malaysia’s longest lockdown in history, the lessons have not been learnt. The Melaka state election in November is a case in point. It only took four state representatives to withdraw their support for the chief minister in order to trigger a fresh election. Sarawak is next.
On top of a state of Emergency declaration,
another controversial move, the new My Malaysia 2nd Home (MM2H) regulations which make it harder for foreigners to obtain long-term residence passes in Malaysia, give the perception that Malaysia is not friendly to foreigners including foreign investors.
Not surprisingly, the unfriendly move was roundly criticised by both foreigners and many locals. The timing, logic and quantum of increase in its requirements did not make sense. As it is, the prolonged lockdown has adversely impacted the country’s economic growth; and the potential revenue from the MM2H programme is sorely needed.
But there is one consolation – Malaysia’s vaccination rate is one of the highest in the world with more than 95% of the adult population having been fully vaccinated. This affords a certain buffer against another runaway new Covid-19 infection rate, but for how long?
Malaysians are hoping that with the third booster jab, the population will be safely inoculated against further infection risks triggered by elections, border re-openings and complacency. We are hoping this new endemic approach towards the pandemic will return a semblance of stability and pre-pandemic normalcy. Covid-19 fatigue and its accompanying mental side-effects are issues we have to live with for the next few months. Let’s hope it does not extend into years.
With a view towards the future, Asian Property Review asked a few experts and stakeholders about how they feel things will turn out for Malaysia, a country with so much potential yet with its progress hindered by many self-sabotaging policies. Indeed, it appears that stabilising the political scene is more elusive than controlling the pandemic.
2022 is definitely a recovery market. The primary market will be moving for sure as there is demand from first time homebuyers. I hope the government will also help the secondary market otherwise the economy won’t be able to recover as fast. The most affected are the SMIs, SMEs, and owners of new and secondary market property. The moratorium helps a lot and is one of the best in the world. But they still need more help especially in financing.
2022 is the beginning of a 12-year cycle of better times. The current cycle started around 2019 -2010 when prices started to rise leading to a boom. From 2021/2022, property prices are at its lowest and interest rates are also at their lowest, hence this is the best opportunity in the market. This opportunity will not be repeated within the next few years. On top of that, cost of materials has increased and there is a short supply of good property.
As this is the new cycle, I myself have moved office, changed the name of my
company, set up an online club for members offering consultancy for property
owners especially in property portfolio restructuring. Many of us have to start again.
There are already a number of buyers in the market ready to grab a good opportunity. For example, in April 2021, there were a few buyers wanting to buy my shoplot in Hartamas which I offered at 20% discount.
Most MIEA members feel that 2022 will be a recovery year. Although the effects will not be immediately seen, what we will likely see is a more stability and more marked improvements towards the end of 2022. Currently, the rental market is quite strong with a lot of renewals as tenants continue to rent. But there is still a lingering anxiety as people await the government’s decision on whether to extend the loan moratorium. The moratorium has provided a lifeline for many.
Furthermore, should the government extend the Home Ownership Campaign (HOC) to the secondary market, it will have a multiplier effect as more transactions means more activities for many related industries. As it is, the secondary market is stagnant now, that’s why the primary market is not moving much either.
2022 will be another flat year but it will springboard to a new cycle as per Dato’ Sri Gavin’s opinion. The property market will take a bit longer to recover due to issues of affordability and oversupply.
So, should people still buy? Yes, because prices overall are on the downtrend and interest
rates are low. For investors, this is the signal to enter the market but for people on the street,
prices are still expensive especially for those whose income was impacted by the pandemic.
2022 is a great opportunity to re-set our lives especially our personal finance. This is because personal finance is the foundation for property ownership. In the case of the moratorium, I foresee the real nightmare to begin only in March 2022 if the moratorium is not extended. This is because for some, the moratorium has been extended until February 2022 due to late commencement.
The market recovery will be in 2022 which is a good year to buy. Market may be flat but it’s a springboard for better performance towards end 2022. Currently, the market is very healthy for cash rich buyers due to the low prices and low interest rates. There is light at the end of the tunnel. This is especially so if the HOC is extended for 2022.
2022 definitely looks very promising; however, two factors will influence how strong the recovery is. Firstly, how successful are we at controlling the pandemic. As it is, we are still very cautious because of potential new variants. Secondly, the business and consumer confidence is still not fully restored despite interstate travel being allowed. With our borders about to be re-opened to international travellers soon, there is a lingering worry that this might trigger another round of soaring new infection rates. So, we might have to wait till 2H 2022 to have a clearer picture of where we are headed. Furthermore, the aftermath of state elections is still uncertain in its impact on the infection rate. So, 2022’s recovery will not be straightforward.
It has been a very challenging 2021 for the world and especially Malaysia due to our political instability. The pandemic and politics have greatly affected our economy. If the politics is stable, then we can unite together for a better tomorrow. But personally, I don’t think so which is unfortunate because we need political stability to boost the economy. If the central or state governments are still fighting, I don’t see how we can unite together to fight for the economy.
Along with the rest of the world, Malaysia is also facing a supply chain crunch attributed mainly to China’s power supply issue. With disruptions in the world supply chain of goods and raw materials, many manufacturers, exporters and importers will be affected from now till 1H 2022. For business people, this is a serious setback to full recovery.
This however may prove a fruitful time if businesses practise the 3 ‘R’s:
- Realignour business;
- Reconnect: For a lot of businesses, activities have shut down for so long, we need to reconnect with suppliers, distributors, the market and consumers;
- Reboot: Bring in new ideas and creativity without which, business will be stuck.
There is a silver lining however; one sector that will see a boom in 2022 will be agriculture. I foresee agricultural modernization will be the highlight of 2022 with more farms adopting new technology like high tech greenhouses. This can increase yield and reduce labour requirement. Hopefully, this will overcome the current shortage of food supply worldwide.
I foresee 1H 2022 to be very healthy and the market might even turn bullish with the recovery momentum picking up especially with interstate travel being allowed and soon international inbound travel. Furthermore, over 90% of the adult population have been fully vaccinated. But full recovery will take longer than one year.
Take for example, the US recovery experience; it had a good run in the beginning of 2021 but slowed down from 3Q 2021 onwards. Similarly, in Malaysia, I expect 1H 2022 to be bullish assuming there are no big disruptions or another lockdown. I also expect the expansionary Budget 2022 to boost the economy in 1H 2022.
But the recovery will stabilize or slow down in 2H 2022 due to several factors. There will be a slowdown in spending due to the long lockdown in 2021. Political uncertainty may cast a shadow on recovery. With the general election expected to take place before July 2023, there will be a lot of political noise until after the GE. This will naturally affect the recovery momentum.
I expect the Malaysian economy to pick up fast as more than 90% of the adult population have been vaccinated, and many business and economic sectors are open. We can expect sharp upturn in the macro level and we also expect the GDP to trade between 4 and 5.5 % in 2022. Growth sectors would be commodities, ICT, manufacturing, real estate services and technology. Growth will also be boosted by the Budget 2022 which will likely be recovery-focused and growth driven.
Following a 1.5% contraction in 2020, Asia’s regional GDP is forecast to rise by 6.1% in
2021, driven by China’s economy. While Asia’s long-term economic outlook remains
promising, geopolitical risks are intensifying in the geo political and strategic landscapes.
The outlook for 2022 remains challenging after a long period of multiple lockdowns for the past 18 months. The recovery is expected in 2Q 2022 onwards for most industries including the property market.
I am very positive on the outlook for 2022. Although it won’t be a V-shaped recovery, it is nevertheless a growth recovery. Will it be a slow one? I foresee things will pick up quickly for business in general, but not so much for the property market. A lot of businesses have been impacted but those that have survived up till now will be quite aggressive for takeoff. Everyone will be working very hard to bring back their business to pre-pandemic levels.
We are seeing a glimmer of hope as the lockdown eases, and activities are opening up. It will be a slow recovery as the situation is still very fragile.