All steady on the home front in Penang residential properties

Sales done: According to Knight Frank Malaysia, there are pockets of success by some developers reporting bookings and sales for their affordable homes during the movement control order period despite the fact that physical viewings were disallowed.

DEMAND for residential properties in Penang is expected to remain steady during the second half of 2020, especially if the homes are from renowned developers with good quality products.

Knight Frank Malaysia executive director Mark Saw says there are pockets of success by some developers reporting bookings and sales for their affordable homes during the movement control order (MCO) period (from March 18 to May 3), despite the fact that physical viewings were disallowed.

“In this challenging environment, developers with a strong brand name and good delivery of quality products should still achieve decent returns and the gap between higher and lower quality properties will become more evident with better sales for those able to deliver.

“These factors will play a critical role in determining the success of developments. It has become a buyer’s market and many deals are being offered by developers to attract first-time buyers as opposed to investors who have been temporarily sidelined, ” he tells StarBizWeek.

Due to the Covid-19 pandemic, Saw says buyers’ preferences and timings may change, with decisions being put on hold due to job security, ample choices and rentals being more competitive.

CBRE|WTW director Peh Seng Yee says the pandemic’s impact has been softened in the second half of the year with the recovery MCO (which was implemented from June 10).

CBRE|WTW director Peh Seng Yee says the pandemic’s impact has been softened in the second half of the year with the recovery MCO (which was implemented from June 10).

“As housing is a necessity and with the bank loan moratorium, the residential property sector has been cushioned from the worst impact.

“Hence, the residential market is expected to remain resilient for the second half of 2020. Significant growth is not expected yet as the issue of property overhang, lack of spending confidence by consumers and stringent lending policies by banks are expected to still linger for the remainder of the year.”

Additionally, both Saw and Peh agree that the reintroduction of the Home Ownership Campaign (HOC) was a much-needed boost to the local property market. The government reintroduced the HOC in June under the Short-Term Economic Recovery Plan (Penjana).

 

Mark Saw: In this challenging environment, developers with a strong brand name and good delivery of quality products should still achieve decent returns and the gap between higher and lower quality properties will become more evident with better sales for those able to deliver.

Peh says the HOC is expected to continue to spur the buying momentum for residential properties in Penang over the short term.

“Developers are experiencing a pick-up in bookings by buyers compared with the first half of 2020, which was mainly affected by the MCO.

“However, the encouraging bookings have yet to be fully translated into good actual sales, due largely to stringent lending policies by the bank and the challenges and uncertainty in the economy and job market.”

Saw also believes the HOC will be a short-term reprieve for the local property market.

“The HOC initiatives will only be a temporary measure. For the long term, developers should carry out proper feasibility studies to determine the marketability of their products before commencing developments and ending up with unsold units.”

According to Saw, the volume of residential transactions in Penang decreased 19.7% to 2,748 units in the first quarter of 2020 compared with 3,422 units in the fourth quarter of 2019.

“The value of transactions in the residential sub-sector during the first quarter (RM1.06bil) indicated a drop of 17.2% compared with RM1.28bil in the fourth quarter of last year, ” he says.

Under the HOC, stamp duty exemption will be provided on the transfer of property and loan agreement for the purchase of houses priced between RM300,000 and RM2.5mil.

Meanwhile, the exemption on the instrument of transfer under the HOC is limited to the first RM1mil of the home price, while full stamp-duty exemption is given on loan agreement effective for sales and purchase agreements signed between June 1 and May 31,2021.

The government has also announced real property gains tax (RGPT) exemption for Malaysians for the disposal of up to three properties between June 1,2020 and Dec 31,2021.

The HOC was kicked off in last January to address the overhang problem in the country. The campaign, which was initially intended for six months, was extended for a year.

It proved successful, generating total sales of RM23.2bil in 2019, surpassing the government’s initial target of RM17bil.

Meanwhile, Knight Frank in its Real Estate Highlights Research for the first half of 2020 says that amid the current global recession, Invest Penang has revised downwards its foreign direct investment (FDI) target for 2020 to RM5mil.

“This will be supported by the shift towards Industry 4.0 and the various tax incentives and reinvestment allowances as announced under Penjana that seeks to promote Malaysia as a choice destination for FDIs.”

To clear RM2.6bil worth of 3,043 overhang units in the state, Knight Frank says the Penang local government, housing, town and country planning committee has announced that the state will reduce the minimum price threshold for foreign property ownership by up to 40% starting from June 11,2020.

“Ceiling prices for stratified properties on the island will be reduced by up to 20% from RM1mil to RM800,000 and on the mainland, from RM500,000 to RM400,000.”

In the high-end condominium segment, Knight Frank says IJM Perennial has put on hold the development of The Light City.

“Prior to the Covid-19 pandemic, the group had indicated that it would resume development in August 2020. To be developed over a period of more than four years, Phase 1 will feature a mall with 680,000 sq ft net lettable area, the Penang Waterfront Convention Centre, a four-star hotel with 500 rooms, offices and the ‘Mezzo’ residential condominiums.

“Meanwhile, for Phase 2, there are plans for a 300,000-sq-ft mall, a five-star hotel with 250 rooms, offices, the ‘Essence’ residential condominiums and possibly an experiential theme park. It is worth noting that the commencement of Phase 2 will be determined by the sales of the Mezzo condominiums and the occupancy of the mall.”

As for the office sub-sector in Penang, Knight Frank says the average occupancy rate for four prime buildings monitored in George Town remained stable at 89%.

“According to the latest National Property Information Centre report, the average occupancy rate in the state continued to hold steady at 81.4% in the first quarter of 2020 (compared with 81.3% in the fourth quarter of 2019).”

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We found that data availability and transparency in the real estate sector is less than what we were used to when we were working in the financial industry and we are set to change that, ” says Red Angpow co-founder Erhan Azrai.

PETALING JAYA: Even as many consumers are cautious in purchasing high-ticket items in light of the Covid-19 pandemic, industry experts say sale of properties and cars have been rising since June.

Real Estate and Housing Developers Association (Rehda) Malaysia national council member Tony Khoo Boon Chuan said property sales had picked up since June, thanks to lower interest rates and the extension of the government’s Home Ownership Campaign (HOC) until 2021.

“No doubt buyers are guarded when buying high-priced products.

“But others who are not affected financially also realise the time is here to buy or invest in a new property, ” he said in an interview.

Apart from the HOC’s 10% discount on the selling price, Khoo said buyers also enjoy incentives such as stamp duty exemption, free legal fees and freebies such as home security and alarm systems, additional cabling, fittings and fixtures.

“There are so many choices with perks and benefits in the market now for buyers.

“This is indeed the right time to invest, ” he said.

HOC is a government initiative in 2019 aimed at supporting homebuyers, and it has been reintroduced in June under the Penjana economic revival plan.

Khoo noted that the government’s exemption of real property gains tax for Malaysians for disposal of up to three properties had made it easy for property sales in the secondary market.

“This will certainly encourage a lot of investors and buyers who are looking to upgrade, ” he said.

In the automotive industry, both new and used cars have seen brisk sales in recent months, with foot traffic at showrooms having increased tremendously.

Malaysian Automotive Association (MAA) president Datuk Aishah Ahmad said new car sales improved to 42,000 in June, compared with 22,000 in May, following the government’s announcement to remove the sales tax for certain categories of vehicles.

“Many car companies are offering lots of discounts and attractive hire purchase rates to entice customers, ” she said.

Although many car buyers are still cautious, she said premium cars purchases did not see much problem.

In fact, Aishah said MAA had readjusted the forecast of Malaysia’s total industry volume to 470,000 for this year, versus the earlier forecast of 400,000.

Federation of Motor and Credit Companies Association of Malaysia president Datuk Tony Khor Chong Boon agreed, adding that the used car market had also experienced tremendous growth in July.

“June sales were on par with full recovery following the recovery movement control order.

“July was very encouraging with 37,880 units sold, which is 25% higher than the same month last year, ” he said, adding that it was the highest monthly sales achieved in the last five years.

In contrast, he said used car sales only chalked up 303 units in April, when the usual monthly figure was between 30,000 and 35,000 units.

Khor said several factors contributed to the recent good vibes in the automotive industry, with measures introduced in the government’s economic revival plan shown to work.

“The moratorium has allowed some to have more money to spend, while the sales tax exemption has stimulated sales.

“Some buyers choose to get a car due to concerns about physical distancing and hygiene in public transport, ” he said, adding that used cars costing around RM30,000 were popular.

He noted that brisk sales of used cars resulted in a long waiting time for inspection at Puspakom, with a minimum wait time of at least five to seven days, and even 10 days or more at some locations.

When asked, Khor said it was hard to predict how long the good vibes would last because the real challenge would come when many borrowers are required to pay when the moratorium is lifted beginning October.

“To keep the market and economy stimulated, the government has to periodically come out with relevant measures and policies, ” he said.

Human resource executive CW Lim, who has been househunting for a few months, said he would make use of the discount and offers to buy a house in the Klang Valley.

“With the HOC, I’ll be able to save tens of thousand in downpayment, stamp duty fees and legal fees that could take me years to save up.

“Since my job and industry is not affected much, I hope I will soon own a house through these offers, ” said the 30-year-old from Klang.

Clinic nurse Farisha Azman, 29, who has been commuting to work from Subang Jaya to Shah Alam daily using the train, said she was in the process of buying a new car.

“Not having to worry about distancing on the train gives me peace of mind, ” she said.

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Serving property investors’ needs

WITH the property market expected to remain soft over the next few months, tech startupRED ANGPOW Analytics is hopeful that property owners will be knocking on its doors for help to better manage their asset portfolios.

The company does online map-based real estate due diligence, feasibility study and price analytics.

“We foresee asset holders requiring good information to manage their portfolios. Data on past transactions that have been useful will no longer be enough.

“We found that data availability and transparency in the real estate sector is less than what we were used to when we were working in the financial industry and we are set to change that, ” says Red Angpow co-founder Erhan Azrai.

The startup generally has two groups of target clients, which are development-based organisations and individuals who use research to make decisions such as property investors, analysts, researchers, valuers and banks. Red Angpow’s services are not only useful for developers, but also related industries that are supporting real estate.

Erhan notes that clients are becoming savvier and are looking for more opportunities in the soft property market and they will need more relevant data to make their investment decisions.

“After the 1997-1998 financial crisis, the National Property Information Centre (NAPIC) was created to provide accurate and timely information on the property market.

“In the current environment, we believe the timing is right for an enhanced service.

“In the longer term, there is a need to increase the efficiency of the real estate market with a lot more data transparency.

“From the work that we have done so far, we saw that a lot of data is actually available, but it is unstructured and comes from multiple sources.

“Before we can compile all this data via an artificial intelligence means, we are doing the very basic first, which is getting the data cleaned, tagged and harmonised in a form that can be used easily by researchers, ” he says.

He adds that ensuring property investors have timely and accurate data has become even more important now as real estate loans make up a sizeable portion of total loans.

As of February 2020, Erhan notes that real estate loans in the banking system stood at RM836bil or 47% of total loans.

“This staggering amount needs better data to manage the portfolio, especially when industries are cutting jobs. A 10% downward correction will affect up to 5% of the total loan portfolio, depending on the age of the loan asset. That’s a huge amount.”

While the movement control order (MCO) has hindered some of its plans, Red Angpow has been fortunate to have raised enough capital to weather the course for the next two years.

“So, we are going to stay the course. The MCO allows us to hunker down and complete our work. We planned to launch a subscription for property analytics dashboard by July. But we are confident that we will hit the ground running once again after the MCO is lifted, ” he says.

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RM525mil investment for Penang to create 1,600 jobs & human capital programme

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