China outbreak to hit regional property markets

China has been the biggest provider of capital that helped boost sales at property companies across the region


MALAYSIA’S property market, which has been in part supported by the easy and cheap money from the global quantitative easing (QE), could be in for a tough first half of the year as the global economy slows, and investors shy away from the market due to the coronavirus outbreak.

The move by companies like Paramount Corp Bhd to expand into property development in Thailand is seen as risky by some analysts.

Economist and political analyst Prof Dr Hoo Ke Ping expects the economies of many countries will be dragged down by the coronavirus outbreak as China has been the biggest provider of capital that helped boost sales at property companies across the region.

“For example, Forest City and other properties in Brooklyn, New York, Australia all dried out even before this virus problem, two to three years back after China put restrictions on cash transfers. That’s why Chinese buyers cannot even buy Forest City. Forest City and Danga Bay are ghost towns,” he said.

He foresees the problems in China will drag down the global economy with reports saying the global property market might be hit hard if the coronavirus becomes a pandemic.

Hoo foresee the outbreak in China will last more than six months for a simple reason: It’s out of control.

“China’s GDP constitutes a big part of the global GDP. So, when China sinks, all countries around the world whether it’s South Korea, Japan, Singapore, Malaysia (partly) or Thailand will be affected.

“When the global supply chain is affected, we will have a big negative impact. When China’s capital doesn’t come out, how or who’s to buy property?” he said, adding that property developers in Malaysia should now instead cash out.

“They should try to sell houses at a cheap price to raise cash for the rainy days because the rainy days are heavier and longer. Companies who went outside Malaysia must have cash. If they start borrowing, they will have problems because there is always an exception,” he said.

After about 15 years of uninterrupted rise in house prices, the Swiss government instituted cooling measures on its overheated property market. The measures have finally succeeded.

House prices dropped 2.25% during the year to the third quarter of 2019 (3Q19), its ninth consecutive quarter of year-on-year (YoY) declines. During the latest quarter, prices increased slightly by 0.31% quarter-to-quarter according to Global Property Guide.

Phnom Penh’s apartment market is expected to cool this year, mainly due to the oversupply of apartments in the city, according to local real estate experts.

Hong Kong’s (HK) housing market boom is now over, with residential property prices falling by 5.37% during the year to the 3Q19, in stark contrast to a YoY rise of 11.28% in 3Q18.

Paramount on Wednesday purchased a 49% equity interest in a Bangkok-based property development company for RM8.44 million, marking its entry into Thai property development market.

Malaysian developers venturing abroad is nothing new. Sime Darby Property Bhd and SP Setia Bhd each own a 40% stake in the Battersea Power Station development in London. The remaining 20% is held by the Employees Provident Fund.

IOI Properties Group Bhd has developments in Singapore along with YTL Land & Development Bhd. In property-crazed Singapore, owning real estate isn’t always the high-yielding investment people might think. The rates of return for private apartments in the city-state have slipped since 2011, when measures to cool the market were introduced by the government.

Some units now have a lower yield than Singapore’s national pension plan, the Central Provident Fund, which has a minimum fixed rate of return of 2.5%, research from property analytics start-up UrbanZoom shows.

CBRE-WTW (CBRE Group Inc and CH Williams Talhar & Wong Sdn Bhd) MD Foo Gee Jen believes expanding into foreign markets can be a right move.

“As a business, property developers need to look beyond our shoreline and export their expertise of building townships. There is no reason they should not explore other regions to diversify,” he told TMR.