Property market to show gradual recovery

The continued effective management of the Covid-19 situation is also crucial to have the market back on track, says Rahim & Co


THE Malaysian property market is expected to show a gradual recovery this year as the country achieves higher vaccination coverage coupled with continued government support, accommodative policies and phased openings of international borders.

Rahim & Co International Sdn Bhd director of research Sulaiman Saheh said having witnessed glimpses of improved performance in between lockdowns in 2021, the property consultancy is cautiously optimistic on the outlook for this year.

He added that however, the continued effective management of the Covid-19 situation is also crucial to have the market back on track to a sustainable recovery pace.

“The recovery expected in 2021 was disrupted by the resurgence of Covid-19 cases and though the first six months did improve significantly, third quarter (3Q) performance caused a slight pull back which ultimately ended with a more muted nine-month transaction performance.

“Thanks to the government’s stimulus measures, the property sector’s performance has been stable,” he said during the launch of Rahim & Co’s Property Market Review 2021/2022 report in Kuala Lumpur yesterday.

Sulaiman noted that nevertheless, the anticipated property market recovery to pre-Covid levels will require more time than initially expected.

Commenting further, he said 2021 may have seen several more closures of retail brand outlets but new openings and expansions were also observed, signalling a resilient market that is adapting itself to a new business environment.

He pointed out that as such, seasonal sale periods were viewed with better prospects.

He also added that while e-commerce has established its position as the new way to shop, physical shopping malls and retail outlets maintained their relevance as evidenced by the returning footfalls of shoppers during times of interstate border reopening and lesser movement restrictions.

According to Sulaiman, of the major sectors in the property market, the industrial sector presently continues to attract more attention than others.

He said the industrial sector is viewed as one of the more stable sectors performing in a pandemic environment due to the logistics, warehousing and healthcare segments.

“This is further boosted by the overwhelming demand for e-commerce transactions which will continue to hold the spotlight moving forward.

“Considering the slower relative pace of incoming supply, especially for managed industrial parks with built-to-suit arrangements, industrial property investments will be keenly observed this year,” he noted.

Recapping 2021, Sulaiman said the property market’s national transaction numbers saw a significant rebound in the first half of 2021 (1H21) pulling in 139,754 transactions worth RM62.01 billion, which is an increase of 21% in volume and 32.1% in value year-on-year (YoY).

He attributed this to the pent-up demand effect and deferred transactional formalisations from previous quarters that had been delayed as well as supported by the accommodative policies by Bank Negara Malaysia.

Sulaiman added that however, as 3Q of 2021 performance was hampered by the Full Movement Control Order, the country’s overall nine-month performance was more muted though an improvement was still seen for the total value of transactions.

He noted that 2021 came through with 201,065 transactions worth RM98 billion for its first nine months, registering a slight drop of -1.8% in volume but a notable increase of 21.4% in value YoY.

On the residential sector, Sulaiman said transaction activities showed growth in the 1H but slowed down in 3Q21, resulting in an overall growth of 2.6% for the first nine months of the year.

“On the supply side, new launches in the primary market had dropped as developers were still adjusting and affected by the continuing pandemic and the country’s containment measures.

“Sales too were seen to move slower yet sporadic quick sales were also observed for owner-occupier and domestic-focused markets,” he said.

Nevertheless, he noted that market recovery efforts were supported by the incentives and economic stimulus provided by the government.

On the commercial segment, he said challenges in tenancy performance and rental levels carried on into 2021 as incoming supply continued despite demand still being shaken up by the pandemic.

He added that the Klang Valley’s office space occupancy rate is at 72.1% as of 1H21 after a further fall of 3.3% from 1H20’s 75.4%.

“At this tenancy level, the Klang Valley’s office market is looking at a vacant space size of 41.9 million sq ft (3.9 million sq m) currently sitting empty and unoccupied.

“Factors that contribute to this challenging situation faced by office building owners include the new workplace practises that have focused more on remote working for social distancing purposes and staying relevant to the current trend in demand by new and existing tenants against a highly competitive supply market,” he said.

Sulaiman also highlighted those similar challenging sentiments and conditions were also seen for the retail sector, which had been heavily affected by the pandemic due to significant loss of foot traffic.

He said the national occupancy rate declined by 2% to 76.6% in 1H21 from the previous year, including the Klang Valley by 1% to 80.1%.

Of the existing retail complex space in the Klang Valley, 14.7 million sq ft are left vacant out of the total 73.6 million sq ft.