The Malaysian Insight

PROPERTY agents are seeing an uptick in home purchases, in part because of government measures to stimulate the Covid-19-stricken economy.

Agents told The Malaysian Insight the pandemic has presented the perfect opportunity for buyers who have the financing to invest in housing, rather than place money in fixed deposits which are offering low interest rates.

“Property investments at this moment are quite active, investors are out on the market to hunt for good deals,” said Henry Heng, a real estate agent from Reapfield Properties.

“Because of the Covid-19 situation, the government has tried to stimulate the economy. The banks have lowered the interest rate, thus it demotivates people to put their funds into fixed deposits,” Heng said.

The overnight policy rate (OPR) is currently 1.75%, the fourth consecutive rate cut by Bank Negara Malaysia since January 22, and the lowest since 2004.

“Before Covid-19, the interest rate for house purchase was 4%. Currently, you can buy a house with a 3% interest rate or lower,” said Heng, who is handling buyers in their mid-20s to late 30s.

Most of Heng’s clients are young working adults, who want to fulfil personal goals of owning a home.

Ng Fun Yee, 27, told The Malaysian Insight she was able to bring forward plans to purchase a home because of the current situation and good interest rate.

“Initially, my fiancé and I planned to buy a property next year. However, we found this condominium project in Petaling Jaya selling at RM570++ per sqft, which is way below the market price.

“We bought it because it was a good deal and we liked the place. The interest rate for the loan was rather low as well,” she said.

Other agents said there is strong interest from buyers not affected financially by the pandemic.

Teoh May Sun, director of the KL Team for Zeon Properties, said there are buyers who are in a cash-fluid position and who can manage timing risks.

“Incentives have become attractive for buyers as the government has waived the fee for the memorandum of transfer and developers are adding benefits to support the ecosystem,” Teoh said.

Another property agent from Dutama Properties, Deric Lim, concurs that the current low interest rate is driving sales.

“People were waiting for pent-up demand or super-good deals.

“Last year, the interest for home loans was 4.5%. Today, you can get it at 2.9%. It is almost a 20% difference. People are moving out their money from fixed deposits into properties.

“In the past, fixed deposits were 3%. Now, they can only get 2%, so they would rather put their money in properties that can give them a higher rate,” said Lim, whose clients are mostly investors and businesses executives in the glove and medical sectors who have benefited from the pandemic.

Actual figures on the number of sales and total value for this period are not yet available as the housing industry only compiles and puts out reports every six months, agents said when asked for details.

Lim, however, said he would not be surprised if the third quarter of 2020 would be the best quarter of the year for the sector.

“For me, the number of transactions is almost coming back to like before (Covid-19), and it will continue to grow,” said Lim who specialises in branded residences.

The flurry of activity in property purchases was helped by the use of virtual technology to conduct home tours, as a way to get around the rules on gatherings, hygiene and physical distancing aimed at curbing the spread of Covid-19.

This has allowed agents to meet more people, including international clients.

There is much more activity now than in March when the movement-control order (MCO) began.

“The market came to a standstill (when MCO was imposed), we could not comprehend what had struck (us),” said Ganaswaran Mahendran, a team leader from Reapfields Properties.

“But from July onwards, if you compare our prior-year results with this year by month, we did better.”

Unpredictable outcome

The property agents that The Malaysian Insight interviewed are focused on the sale of residential properties in the secondary market, mainly in Petaling Jaya, Taman Tun Dr Ismail, Bangsar and Damansara Heights in the Klang Valley.

“Rain or shine, people still need a house to stay. The property industry is still an essential business. When people benefit from the economic changes, they upgrade to a bigger and nicer home. And if they are affected, they downgrade or cut costs,” said Heng.

He attributed the property sector’s revival after virus lockdown measures to the economic stimulus packages.

These include an extension of the home ownership campaign (HOC), stamp-duty exemptions for properties priced between RM300,000 and RM2.5 million, 100% exemption for the financing agreement, as well as real property gains tax (RPGT) exemption for Malaysians disposing of up to three properties until the end of next year.

Lim said the RPGT waiver has encouraged people to sell at slightly lower prices.

“So, there are rebates for both sellers and buyers, and this helps the local market to be more active.”

Ganaswaran, however, is concerned about the situation once the loan moratorium ends at the end of this month.

“The next six months will be critical, especially once the moratorium on loans has ended. I do not expect this period of uncertainty to end any time soon.

“In my opinion, this will last for the next two years,” said the 65-year-old agent who has worked in real estate for more than 28 years.

Compared to the 1998 and 2008 financial crises, the property sector in the present pandemic-induced crisis has less predictability.

“This crisis we are facing now has an unknown direction.

“Although the stimulus packages are good for the current period, it will not work in the long term unless perhaps, a vaccine is found quickly,” Ganaswaran said.

Teoh of Zeon Properties said the government could consider potential incentives, such as absorbing the downpayment of up to RM10,000 for first home buyers.

“Secondly, provide up to 90% loan for all interested and eligible buyers.

“Lastly, examine how banks can be more participative by improving loan margins and acceptance rates for buyers,” Teoh said.

As long as there are policies to spur activity, the industry can keep moving and cash flow can remain positive, other agents added. – September 25, 2020.