Residential rental market poised to bounce back

PPC International managing director Datuk Siders Sittampalam said once the lockdown is lifted and daily Covid-19 infections continue to decline, yields will improve.

KUALA LUMPUR: The Malaysian residential rental market is expected to start seeing improvements once the economy opens up completely, say property consultants.

PPC International managing director Datuk Siders Sittampalam said once the lockdown is lifted and daily Covid-19 infections continue to decline, yields will improve.

“The uncertainty is still there and this will increase the need to rent, rather than buy,” he told StarBiz.

One sub-segment that has taken a hit during the pandemic has been student accommodations, said Siders.

“Demand for student accommodation has reduced drastically as many have gone back to their hometowns and learning is conducted online.

“Once things go back to pre-pandemic levels, things will improve.”

Siders said the local residential rental market has been in decline for the past five-to-seven years.

“It has been on a decline but it has not been drastic. This is due to an oversupply of residential units over the years, especially high-rise.”

He added that yields for landed residential units have also remained low for a number of years.

“As more properties entered the market and remained empty, rental rates became competitive. However, in time, as the units get taken up, things will start picking up again.”

City Valuers & Consultants Sdn Bhd real estate services and business development head Ruben Kelvin (pic below) says the local residential rental market will likely remain stagnant for now.

City Valuers Ruben KelvinCity Valuers Ruben Kelvin

“I don’t think things will change for now. With the way things are, many tenants will be adopting a wait-and-see approach until the economy improves.

“Until then, they are more likely to hold on to their existing units rather than upgrade.”

He says those wanting to relocate may even delay that decision until there is more certainty in the market.

“Tenants will be more inclined to upgrade their existing units rather than move into a brand new one.”

With the current nationwide lockdown in place, Ruben said it is also difficult for transactions to move.

“Once vaccination levels are up and we get closer towards herd immunity, more viewings of potential rental properties can be done as people will feel more safe.”

An industry observer said the various government incentives announced by the government, such as the Home Ownership Campaign (HOC), is a much needed boost to spur the primary property market.

“Why not extend some of the incentives under the HOC to the secondary property market as well,” he said.

KGV International Property Consultants (M) Sdn Bhd director Samuel Tan (pic below) concurred, suggesting that incentives under the HOC such as the stamp duty waiver, should be extended to the secondary market.

KGV International Samuel TanKGV International Samuel Tan

“This will incentivise the prospective buyers to look at the secondary housing market,” he said.

At the launch of the National Property Information Centre (Napic) in April, Finance Minister Tengku Datuk Seri Zafrul Abdul Aziz said the overall property sector recorded 295,968 transactions worth RM119.08bil in 2020, which was a 9.9% year-on-year decline in volume and 15.8% drop in value compared with 2019.

Despite the weaker performance, Tengku Zafrul said that the market is expected to perform better this year, underpinned by the national immunisation programme and numerous government incentives.

Meanwhile, Napic said the residential sub-sector led overall property market activity in 2020 with a 64.7% contribution in volume.The sub-sector recorded 191,350 transactions worth RM65.87bil, a decrease of 8.6% in volume and 9% drop in value compared with 2019.

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