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Cautious hope for Property Market Recovery – Henry Butcher Malaysia

A look into the property market of 2022.

Henry Butcher (HB) Malaysia Group had just released their annual report on the review and outlook for the Malaysian property market in 2022 titled “HB Perspective 2022”.

In presenting the report, Mr. Tang Chee Meng, the Chief Operating Officer of Henry Butcher Real Estate, noted there is hope of recovery to the property market in 2022 due to the speedy vaccination progress that have bought control to the Covid-19 cases.

“Overall, we are cautiously optimistic that the Malaysian property market will show firmer signs of recovery in 2022 as the Covid-19 pandemic appears to have been brought under control with the achievement of an above 79% vaccination rate and the reduction of serious infection cases.”

Mr. Tang Chee Meng, the Chief Operating Officer of Henry Butcher Real Estate

The hope, however, is balanced on a caution line with the current uncertain and unstable political situation. Along with the toppling of several state governments in recent months, Tang advised that the situation will remain an area of concern until a more precise picture has emerged after the 15th General Election (GE 15).

Residential Sector

There seem to be positive signs in the residential segment as it gets back on track. However, it is stated that there might be a reduction in buying interest in early 2022 due to the conclusion of the Home Ownership Campaign (HOC) in the end-2021 with no further indication of extension by the government.

On a further note, the primary market is faring better than the secondary market due to the incentives provided by developers and the government under the HOC. This, too, would change considering that the HOC has ended. A number of banks had also refocused on the secondary market as the house buyers of such homes are perceived to be financially more well off and less likely to default. An increase of interest may also be seen at the same time with a vacuum in new supply of higher-priced homes in good locations.

On the brighter note, landed residential properties, high-rise apartments of affordable price range, smaller units and niche high-end projects in good locations are stated in the report to be the main focus. The house designs will also evolve to address issues arising from the pandemic.

“This includes better planned and equipped study area to make work from home more comfortable, providing more electrical power points and improved internet connectivity including for common areas, adoption of all types of touch-less technology eg., automatic doors, voice-activated elevators, cellphone-controlled entry, hands-free light switches, curtains and temperature controls, implementation of controlled entry / exit points which can be manned with temperature screening or even some form of UV disinfecting device, dedicated lockers / room for temporary storage of parcels for later pick-up by residents and charging stations / points for electric vehicles which are expected to grow in popularity in the coming years.”

HB Perspective 2022

Office Sector

On the other hand, the office sector is stated by the report to be under pressure. Signs of recovery are only possible if there is sustainable progress in the economy that increases demand for office spaces or at least allows companies to maintain their present offices.

Other factors to look out for would be the new hybrid style of working from home and the reduction of office space of many offices adopted by major companies. In the Klang Valley, concerns about the oversupply of office spaces will continue exerting downward pressure on occupancy and rental rates. Additionally, HB stated this would worsen the completion of a vast count of large-scale office projects over the next one to two years.

Nevertheless, increased demand for office space and stability to occupancy and rental rates will be seen due to the government’s implementation of various economic stimulus programmes. Along with that, a decline in demand for office space that was aggravated due to the pandemic will likely lead to the shelving of deferring of some new office projects.

Retail Sector

The retail sector is overall rebuilding itself with a statement from HB that the purchasing power of Malaysian households will be affected due to the increased and are rising prices of many F&B outlets in the first half of 2022.

HB expects malls to invest more into digital infrastructure such as software, hardware, and human resources to allow more convenient ease to shop for goods and services in multiple formats available for shoppers. A total of at least seven new shopping centres and a mall extension are expected to open in Klang Valley this year. The total nett floor area will be 4.7 million sq metres. However, these malls are predicted to face difficulties upon opening.

“Shopping centres targeted for opening in 2022 will face challenges to fill up most of their retail lots upon opening. To attract permanent tenants to open in their shopping centres, retail landlords will need to lower rental rates and/ or offer longer rent-free periods. At the same time, they need to look for temporary tenants to fill up empty lots, especially at prime locations.”

HB Perspective 2022

On further note, small-format grocery-related shops enjoyed better sales during the lockdown period. Even fixed-price stores have become popular due to affordable retail goods—a now common pick for many mini-anchor tenants of many shopping malls in Malaysia.

Industrial Sector

The industrial market will continue to rise as it is reported to be driven by the e-commerce sector, which has generated demand for distribution hubs, warehousing and logistics facilities. The MCO is also said to contribute to the huge demand for online purchasing, especially for groceries and food, and an increase in interest in putting up data centres.

The good outcome is that the economic slowdown in this segment caused by the pandemic appears to have bottomed out. Malaysia’s trade statistics showed that exports have continued to rise month on month in 2021, and the trade balance has remained positive. This will provide a boost to demand for industrial properties.

“The increase in inflow of Foreign Direct Investments (FDIs), especially in the manufacturing sector, in the first nine months of 2021 will hopefully translate into an increase in demand for industrial space /properties.”

HB Perspective 2022

Hospitality and Leisure Sector

HB has noted an improvement of the domestic tourism industry as it revitalises itself with the resumption of interstate travel effective in 11th October 2021. The high vaccination rates achieved by the government has also played in the improvement of the overall confidence and boost to domestic and international travel.

“Malaysia Airports Berhad (MAHB) has reported a recovery of passenger traffic for its network of airports in the country for November 2021 to 2.3 million, the first time it has surpassed the 2 million mark since the onset of the Covid-19 pandemic in April 2020. It also reported a surge in domestic aircraft movements which grew 43% to 27,084 in November from the 18,966 recorded in October. This is an indication that domestic tourism is on the road to recovery and augurs well for the hospitality industry.”

HB Perspective 2022

The importance of the property industry and the significant impact it has on the economy is tremendous. Mr Long Tian Chek, the founding partner and director of the Henry Butcher Malaysia group, expressed his hope that the government will continue to develop effective policies and measures to help the property industry tide through this challenging period. All without compromising the interests of house buyers.