The year 2020 was predicted as the year of resurgence for the property sector, as buyers were expected to trickle back, and investor graphs begin to ascend, while overhang properties descend. However, with the recent Covid-19 pandemic, things are looking rather pessimistic. Amidst the fear and uncertainty, many property investors are understandably worried about their property investments.
How will the pandemic affect their investments, and are there any ways in which property investors can undertake to salvage their investments?
Foreign Investors
“Properties could also be impacted if the situation were to prolong for three to six months. I think it will have an impact on the property industry, especially those that involve foreign buyers,” Dzulkefly Ahmad, Former Health Minister of Malaysia, stated.He added that foreign investor concerns were also due to the prohibition imposed by some countries on their citizens from travelling to Malaysia, despite the number of Covid-19 infections in the country being under control.
Juwai.com, an international Chinese property portal, revealed that mainland Chinese buyers bought RM8.4 billion (US$2 billion) worth of Malaysian properties, which translated to 12.1% of the overall transaction value in 2018. To date, China and Singapore are among the top 10 countries buying properties in Malaysia for investment purposes.“For the time being, foreign demand for Malaysian properties, particularly from China and Hong Kong, are slowing down or almost stopped as tourists have stopped coming to Malaysia due to the coronavirus outbreak,” said VPC Realtors (JB) Sdn Bhd Asia-Pacific property consultant, Bruce Lee.
Perhaps it is then advisable that interested investors engage with a local property manager to aid them in their property investment process during this difficult time. Logically, as the pandemic works its course, it is bound to affect Malaysia’s economy, to which may benefit foreign investors as property prices are likely to decrease. Foreign investors should strategically utilise this opportunity to expand their investments in Malaysia. Property managers have a wealth of history and knowledge in regards to the residential real estate market in the area of interest, granting foreign investors an advantage in ensuring that they make the right decisions and benefit from their investments.
A slowing tourism industry
Dzulkefly Ahmad, Former Health Minister of Malaysia, stated that there is a probability the property sector will be affected as the impact of Covid-19 to the economy is very clear, especially in the tourism sector.
A slowing tourism industry affects many, especially Airbnb operators and property investors that rely on Airbnb to drive rental income. According to Airbnb official reports, Chinese tourists were one of its key focus and drivers in 2019, adding that the Malaysian Airbnb accepted 3.25 million guests in Malaysia in 2019.
Chinese tourists represent a huge market in Airbnb, and in relation to that, property investors. With the Covid-19 outbreak, many operators are dealt with a drop in their bookings, as well as reservation cancellations.
While this may lead to a slowdown on foreign and local tourism, there are still plenty of tourists looking to take advantage of the situation, in light of the cheaper airfare and hotel rates caused by the outbreak, to go to countries that are deemed as low risk, one of it being Malaysia. Therefore, there is still a demand.
This is when a property manager comes in handy. Through a property manager, investors would have usable insights and data on what can help maintain your investment’s value and demand. Property Managers would have a good projection of rental income, cash on cash return, occupancy rates, and expenses. In addition, investors should take this opportunity to tap into a larger market share, by offering cheaper rates and value-added service in order to minimise losses, or even profit, during these worrying times.
Malaysia’s Economy
One should be aware that the state of the property sector is highly dependent on a country’s economic strength, which can be indicated via the gross domestic product (GDP). A strong economy produces tenants that can afford rent and homebuyers with greater purchasing capabilities. However, given Malaysia’s current situation, the outlook for 2020 may not be as optimistic.
According to The Edge Markets, Malaysia’s annual GDP has moderated to 4.3% in 2019, the lowest level since the Global Financial Crisis in 2009. The country’s fourth quarter of 2019’s GDP growth has slowed to 3.6%, the slowest in the 41 quarters since 2009.
In addition, Datuk Nor Shamsiah Mohd Yunus, Governor of Bank Negara Malaysia’s (BNM), was quoted saying that Malaysia’s economic growth will further be affected by the Covid-19 outbreak. She stated that it is too hard to predict the impact of the virus outbreak on the country’s economic growth, but the first quarter of 2020 will be affected depending on the duration and spread of the outbreak, as well as policy responses by authorities.
In addition, Datuk Nor Shamsiah Mohd Yunus, Governor of Bank Negara Malaysia’s (BNM), was quoted saying that Malaysia’s economic growth will further be affected by the Covid-19 outbreak. She stated that it is too hard to predict the impact of the virus outbreak on the country’s economic growth, but the first quarter of 2020 will be affected depending on the duration and spread of the outbreak, as well as policy responses by authorities.
According to the report, three months after the SARS concerns eased, the Kuala Lumpur Composite Index (KLCI) increased by 19% compared to prior to the SARS pandemic. The prominent contributors were rubber gloves (+91-210%), technology (+47%), and property (+36%).
Therefore, while it may not be the best time for investors to sell or purchase properties, it is without a doubt that the property sector will eventually recover. the great thing about investing in the property sector is that its demand is eternal. Having said that, investors should utilise this downtime to plan out their next investment move; one that will still result in a return in their investments, be it switching from long-term rentals to short-term rentals or leaving their properties vacant for the time being.
As property managers, we’re ready to aid you in making the right decisions for your investment. As our motto goes, “Your property is our priority,” we at Profere Property Management would be more than delighted to assist you in ensuring that whatever your decision, you gain a return on your investments.
So, give us a call at +6019-275 8200 and we’ll set up a FREE consultation for you!