REHDA: This is probably the worst down cycle

PETALING JAYA (March 20): Real Estate and Housing Developers Association Malaysia (Rehda) president Datuk Soam Heng Choon said the current COVID-19 pandemic and economic uncertainties will affect all sectors in Malaysia, including the property development sector.

Nevertheless, the property sector will have a slight buffer compared with other industries, such as oil and gas, trading businesses and the tourism industry, as property developers have un-realised sales (or unbilled sales) which could cushion the near term impact of the disease, he said.

However, if the situation persists then property development companies would also be affected. The last resort for employers would then be to conduct right-sizing exercises which will result in some of their staff losing their jobs, Soam told in a phone interview.

“I have been through so many down cycles over the years and this is probably the worst. Malaysians are facing the fear of disease spreading, global economic slowdown and political uncertainties, all these are affecting people’s confidence,” said the industry veteran who has been in the construction and property business for over 30 years.

Based on his observation, consumers including interested property buyers are taking a wait-and-see approach due to their lack of confidence and uncertainty about the future.

To regain people’s confidence, Soam said the new Malaysian government under Prime Minister Tan Sri Muhyiddin Yassin who was sworn in on March 1, will need strong political will in implementing policies to solve the current challenges and measures that benefit all economic sectors. Hence, the formation of the Economic Action Council (EAC) comprising government officials and prominent private sector figures is lauded.

“We look forward to the council taking a holistic approach in making policies that could alleviate immediate problems,” said Soam.

However, he stressed that the most crucial thing to do right now is to have strict enforcement in containing the COVID-19 situation in Malaysia.

“If the public fails to take this seriously and with loose enforcement, there could be a third wave of COVID-19 infections which could cost us more!”

The country is currently under partial lockdown from March 18 until March 31 after the government announced a Movement Control Order to curb the spread of COVID-19 but Soam was shocked to see groups of people dining at restaurants in the area where he lives, ignoring the order.

“I am surprised and wondered why they were not worried about the disease as community transmissions will have serious consequences,” he added.

For property developers, on-site construction works have stopped until end-March and this will cause severe losses to the contractors and developers, but this is unavoidable to ensure workers’ safety.

“A quick and painful solution is better than long-term suffering. The government has to take strict measures in preventing the disease from spreading further. As soon as we could resolve this problem, the economy could get back on track and this will benefit everyone,” he stressed.

The government and Bank Negara Malaysia need to work together to provide financial relief for the business owners to resolve cash flow problems and keep businesses running.

There is no one size fits all, government agencies need to talk to different industry stakeholders to understand what works best for them, said Soam.

For the property sector, developers hope that the government could among others:

1. Continue with the Home Ownership Campaign (HOC)

2. Review the Real Property Gains Tax (RPGT)

3. Standardise the threshold price for foreigner buyers in all states

4. Review the loan-to-value (LTV) ratio cap for third home purchase.

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