To buy or not to buy?

PETALING JAYA: Property consultancy Rahim & Co said there are mixed signals and messages in the current residential market but overall interest in the sector remains despite the different and unprecedented challenges facing Malaysians.

There is a lot of “gung-hoism” in the market as a result of the low interest rate environment as well as the various incentives given by developers, its head of research Sulaiman Saheh (pic below) said.

He was delivering his paper titled, “Overview of Malaysian Residential Property Market”, at the Property Market Outlook for 2020 – Beyond Covid-19 last week.

The event was organised by the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector, Malaysia (PEPS).

“It may be a good time to buy, but this is only for those who are prepared to make a long-term commitment. It is not a good time to buy for those who lack job security, ” Sulaiman cautioned.

Sulaiman concluded that “there was much interest” in the housing market, as evidenced by the jump in loan applications in May and June this year, although there was a tapering in July and August.

Residential loan approvals also improved compared with the same period a year ago, he said.

“This means there is interest, ” he said.

Besides the jump in loan applications, Sulaiman said there was also a sudden income flush among Malaysians, “not because they have extra income, but because they were allowed to defer loan payments” during the automatic loan moratorium period instituted by the government.

“During this period, they invested in stocks, and some may have felt that they can do this in the property market as well, ” Sulaiman said.

While there is this positive group, there are those who lack confidence in the current weak market, and who prefer to rent for now.

As for developers, Sulaiman said they are moving on and are increasingly using different forms of marketing – virtual, customer relationship marketing, mobile apps – to make the marketing process more inclusive.

But the fits of starts-and-stops as a result of the Covid-19 pandemic and other issues have set the market back by some years, he said.

The mixed signals are not only felt in the residential sector but is also obvious in the overall business-consumer dichotomy.

The Business Conditions Index from Malaysian Institute of Economic Research was down for the April-June quarter (Q2 2020) but Consumer Sentiment Index went up for the same quarter.

Sulaiman’s explanation: The stringent movement control order (MCO) was imposed on March 18,2020. The recovery MCO came into effect in early June, so consumers’ sentiment went up, but business confidence remains low.

When it comes to debts, he said most Malaysians are not at the average commitment level.

Instead, most are “fully geared up” or used up their debt service ratio. He said it is important to ask what is the proportion of fixed loans against net income.

At the same event, Socio-Economic Research Centre executive director Lee Heng Guie believes Malaysia has left the economic slum behind but he continues to take a cautious outlook for the broad property sector.

”Pre-Covid-19, the property market was already in doldrums but the government was quick with supportive measures. This helped lift some buying sentiment, ” Lee said.

He presented his paper “Malaysian Economy: A Macro Perspective” in a panel discussion.

He said the measures focused on short-term intervention to spur demand for those who were waiting to buy, helped by interest rates now at a historic low.

Loan application rose after the stringent MCO, but approval slowed down.

But the degree of fall has slowed. The government has put in measures to slow the sentiment going further south, he said. It all depends on how much cushioning the government is able, or willing, to do.

And to potential house buyers: “Buy only when you have income and job stability.”

The risks today, Lee said, is the future path of the virus and an enhanced MCO will be a drag on recovery and on households.