Prices have already declined so much due to multiple MCOs that developers cannot reduce the prices any further during MCO 3.0
by S BIRRUNTHA / pic by TMR FILE
THE property market is expected to remain stagnant in overall asking prices nationwide with the third implementation of the Movement Control Order (MCO 3.0).
According to Centre for Market Education fellow and Bait Al Amanah economist Fariq Sazuki, the implementation of MCO 3.0 will probably cause similar effects on the property market as MCO 2.0, as the property industry has not experienced a significant recovery since the first Covid-19 outbreak in Malaysia.
He said this simply means that the property prices have already declined so much due to multiple MCOs that developers cannot reduce the prices any further during MCO 3.0.
Fariq said from the developers’ point of view, the property prices cannot be reduced any further because the prices also reflect the rising costs of labour and building materials.
The increase in costs incurred is due to the pandemic, time extension and disruptions in the construction supply chain.
“In other words, the current property prices might have adjusted to the pandemic, where developers are more well-prepared of the impacts of the past MCOs.
“Besides that, MCO 3.0 is no stricter than the first MCO, meaning that the additional impacts of MCO 3.0 on the supply side are quite minimal except for the rising costs,” he told The Malaysian Reserve (TMR) in a phone interview.
However, Fariq noted that there is still uncertainty around the third MCO from the demand side.
While there is a perception that the property market can recover due to the low Overnight Policy Rate at 1.75%, he said the change in demand for properties may be ambiguous but lopsided towards richer people.
He added that there is expectation that low-income earners would prefer using the extra ringgit saved from paying loans on essential household expenditures, while wealthier individuals will take advantage of low interest rates to buy more properties, driving prices up.
“However, this situation may only happen at hot spot areas such as Kuala Lumpur, where the demand for properties remains intact even with the pandemic.
“Properties in other areas such as Iskandar Malaysia may continue to face unfavourable fates for a long time.”
Fariq also emphasised that there is no solid evidence so far that the vaccination process can contribute to the recovery of the property market in Malaysia, other than more secure meetings between developers and potential buyers.
Conversely, VPC Alliance (KL) Sdn Bhd MD James Wong indicated that the overall property prices may risk facing a downward trend with the implementation of MCO 3.0.
He said it appears that the number of Covid-19 cases will rise further in the coming months and the situation will continue to hurt the property market.
“With the implementation of MCO 3.0, the economy will suffer further with increasing unemployment, salary cuts and closing down of businesses.
“This will definitely affect the property market and further decline in transactions and property prices are expected in the coming months,” he told TMR.
The latest PropertyGuru Malaysia Property Market Index revealed that the overall asking prices for properties nationwide has dropped by 0.84% quarter-on-quarter and 1.79% year-on-year in the first quarter of 2021.
PropertyGuru Malaysia country manager Sheldon Fernandez attributed the decline to buyers’ apprehension as they take a wait-and-see approach due to the resurging Covid-19 infections and the implementation of MCO 2.0, which affected commercial activity.
He noted that with the backdrop of pandemic-related economic uncertainties, sentiment would remain cautious as the property market is expected to see fluctuating price trends in the coming months.