The series of unprecedented events that Malaysia is experiencing have stressed the need for the government, businesses and consumers to be nimble and agile to come up with quick and new solutions in order to maintain some measure of normalcy.
The COVID-19 pandemic has caused major cities around the world to shut down to curb the spread of the virus, impacting the global economy and hurtling it into a recession.
In Malaysia, the spike in COVID-19 cases and the change of government have caught all Malaysians off-guard, and when the eighth Malaysia Prime Minister Tan Sri Muhyiddin Yassin announced a Movement Control Order (MCO) from March 18 to March 31, plus a further extension to April 14, the gravity of the situation began to sink in. Things may never be the same again.
EdgeProp.my asked six property developers just two questions:
1 What’s next on the horizon and the outlook
for the property industry?
2 What do you hope the government could do?
Their replies share one thing in common, that the government has to engage with the industry more so now than ever to find ways to tide the nation and its people over this troubling time.
The Real Estate and Housing Developers’ Association Malaysia (Rehda) president Datuk Soam Heng Choon said this could be the worst down cycle that he or the country has ever experienced.
The fear of the virus spreading, the global economic slowdown coupled with political uncertainties (referring to events such as the recent political turmoil which saw a change in government “overnight”) have threatened jobs and livelihoods, and no consumer would bother to purchase a property anytime soon as they wait for a clearer picture of the future.
“There is no one-size-fits-all but government agencies need to talk to different industry stakeholders to understand what works best for them and come up with holistic policies that could benefit every stakeholder,” offered Soam.
MKH Bhd managing director Tan Sri Eddy Chen noted that property developers which have benefited from the 2019 Home Ownership Campaign (HOC) would be able to weather the storm as unbilled sales flowing in the next two years could provide some cushion.
To stimulate the property sector in light of the current crisis, Chen said the most effective way is to reintroduce the HOC. “Hopefully, this can be done as soon as practicable,” he added.
Developers are expected to re-strategise their new launches to the fourth quarter of this year, or postpone them to later dates when the situation improves.
UEM Sunrise Bhd managing director/CEO Anwar Syahrin Abdul Ajib believes that it will take some time for the country to recover from the impact of the virus but stressed that everyone must first put aside their differences and be united against the seemingly invincible foe.
“For our country, first and foremost we must have stability in politics and government. Only then can appropriate measures be made to revitalise our economy without fear of changes in direction and policies,” said Anwar, who also hopes to see the HOC reintroduced.
Meanwhile, Matrix Concepts Holdings Bhd group managing director Ho Kong Soon said the government has shown its determination in containing COVID-19 as seen from the measures outlined in the 2020 economic stimulus package to help cushion the adverse impact of the outbreak, with more measures to come.
He, however, suggested that the government may need to set up a special task force to facilitate businesses that are being affected by COVID-19 and work out plans that could be catalysts for economic growth going forward.
IT to the rescue
Since the COVID-19 outbreak started in January, more than a billion people around the world have been confined to their homes, with some leveraging information technology to work from home.
Indeed, it is even more important now than ever for businesses to utilise digital technology and social media to stay relevant and keep their daily operations running smoothly.
Mah Sing Group Bhd founder and group managing director Tan Sri Leong Hoy Kum now knows for sure that digitalisation is the way forward for the entire property development industry in the country, from the construction process right up to marketing communications and customer engagement.
The company is keeping its business running during the MCO with administrative staff working from home using collaboration tools while the customer care personnel stay engaged with customers using messaging applications. Property projects also continue to be available for visits in virtual showrooms, Leong said.
Sime Darby Property too has seen more property buyers shifting from visiting physical show galleries to virtual viewings as the number of online visitors to its website has remained consistent at 90% of the traffic [compared to] before the MCO.
“We have been preparing for a subdued property market and we are using this period as an opportunity to intensify our digital engagements,” said Sime Darby Property Bhd acting group CEO Datuk Wan Hashimi Albakri Wan Ahmad Amin Jaffri.
Be that as it may, Platinum Victory executive director Gan Yee Hin believes that the present and anticipated challenges in the days ahead could be an opportunity to gather every stakeholder to work together with the government in coming up with policies that could improve the overall Malaysian economy and make all industries in the country more resilient in future.
“In this difficult situation, we believe that all parties should support one another to get back on our feet and emerge stronger in due course,” said Gan.
Read on for the developers’ full responses.
Ho Kong Soon
Holdings Bhd group managing director
The most important thing right now is for us to overcome this global pandemic and return to normalcy. Even before the COVID-19 crisis, the property sector was already going through testing times, although we feel the property sector is close to bottoming out.
Developers must maintain resilience, persevere and adapt to market conditions during this compressed environment, which further highlights the importance of sustainable practices in our business strategies. Moving forward, the challenge for developers is to come up with innovative ways to revive the pent-up interest among house buyers after the end of this pandemic.
The government has shown its determination in containing COVID-19, and the additional related measures in the 2020 economic stimulus package will help cushion the adverse impact of this pandemic.
Beyond this crisis, the speed of recovery for businesses will depend on many factors, with government initiatives being the most critical factor. There might be a need to set up a special task force to look into how best the government can facilitate businesses that are directly affected by the virus outbreak, and provide catalysts towards full recovery and growth. At the same time, buffers for the middle- and lower-income groups should also be provided. Bringing back confidence to the financial market, business community and the general public should also be on top of the agenda.
Tan Sri Leong Hoy Kum
Mah Sing Group Bhd founder and group managing director
The outbreak of COVID-19 has certainly placed the world on edge, with many daily routines and lives disrupted. Our hearts and thoughts go out to the people and businesses affected by this unprecedented event.
While the government’s economic stimulus package currently addresses the immediate needs of the B40 group and small businesses, we are looking forward to the additional stimulus to restore investor confidence.
The short-term outlook for the property market is challenging and requires the government to come up with incentives to drive this sector forward. However, the medium to long-term outlook will continue to be resilient for property buyers who are buying to own or invest. Property has always been one of the preferred investment options for Malaysians as it is amongst the most secure form of capital outlay and a good hedge against inflation.
Meanwhile, we are adhering to the MCO and are playing our part to limit the spread and impact of COVID-19. Mah Sing is heavily reliant on technology — our employees are working from home using collaboration tools which have been implemented company-wide for some time now.
Our essential services remain available, and we are consolidating all communications via our customer service hotline or email and social media channels, as well as the MyMahSing App. We are also using online platforms to showcase our products — most of our new projects are available for viewing via virtual showrooms.
While we are using this medium to reach out to buyers during the MCO, we foresee that increased digitalisation is the way forward for the entire industry. Industry players need to be alert and play catch-up once the situation improves.
We hope the government and central bank will come up with impactful fiscal and monetary stimulus measures effectively and quickly to counteract the disruption caused by the COVID-19.
For the property industry, we would like to propose the introduction of monetary stimulus and further interest rate cuts. This can include lower interest rate on loans for the purchase of a first property; reinstating maximum loan tenure to 45 years; higher margin of financing for first property; considering developer interest bearing scheme (DIBS) for first-time homebuyers; and a higher debt service ratio.
We would also like to propose further reductions in the overnight policy rate, personal income tax, corporate tax, sales and services tax; and a six-month deferment on statutory obligation payments like the Employees Provident Fund and SOCSO as well as utility bills (cheaper rate for six months); and tax relief on mortgage interest payments.
Apart from cuts in statutory reserve requirements that have been implemented, we also propose margin calls on shares pledged to banks for facilities to be given indulgence for up to six months in order to release more liquidity into the banking system. To weather through the storm, we are hopeful for the introduction of additional measures such as allowing individuals and corporations to delay payment for up to 50% of tax liable to be paid, as well as fiscal aid to SMEs, and the B40 and M40 groups by providing loans at favourable rates and terms.
Datuk Wan Hashimi Albakri
Wan Ahmad Amin Jaffri
Sime Darby Property Bhd acting group CEO
Prior to the COVID-19 pandemic, it was a well-known fact that the property industry has been soft due to excess supply in the market. Unfortunately, the pandemic has disrupted many, if not all sectors, including the property industry, not only here but across the globe.
The government’s MCO is necessary for the greater good of all Malaysians. We also appreciate the hard work and effort of our frontliners especially our healthcare providers in ensuring the health and safety of the rakyat. We expect the days ahead to be challenging for the industry and for the country. We will have a mountain to climb this year due to the significant COVID-19 impact on the economy, employment and consumers.
It is also likely to hasten more widespread digital customer engagements and possibly even be the catalyst for a disruption in the industry. For Sime Darby Property (SDP), we have been preparing for a subdued property market and we are using this period as an opportunity to intensify our digital engagements. Interestingly, we are still seeing strong traffic to our website, which has remained consistent at about 90% of the traffic [compared to] before the MCO. Additionally, online responses to our properties have been good and enquiries have been coming in on a steady basis.
“Given the continued interest in property and for our customers to be able to buy property from the comfort and safety of their own homes, SDP has deployed an Online Guided Sales Experience campaign from March 25 to April 14 where our sales executives will guide our customers through the products on sale — from enquiries right through to booking a unit — all without physically going to a sale gallery.
The government has announced measures to stimulate the overall economy, which mainly address the need to put more cash in the hands of the people and provide some relief to businesses impacted by COVID-19.
Rehda has proposed that the HOC be extended, which we support strongly, as it had proved to be a success. In addition to Rehda’s proposals, we would also like to suggest for the government to:
● Provide an extension of time for the handover of vacant possession for developers affected by the MCO or COVID-19
● Relax the lending criteria for end-financing
● Allow the implementation of the DIBS for first-time homebuyers
● Deferment or payment in instalment for land conversion premium which will ease developers’ cash flow
Tan Sri Eddy Chen
MKH managing director
COVID-19 is the black swan, the spanner in the works vis-à-vis a property market on the verge of a recovery. The scenario is now completely changed with the macro economy thrown into a tailspin. The property market will take a hit in the short to medium term. Depending on how fast we can overcome the pandemic, we will see a further push back for the property market’s recovery.
Property developers that have benefited from the 2019 HOC will be able to weather the storm as unbilled sales flow in the next two years. This will provide some cashflow cushion for the coming one or two years. I can foresee launches being delayed or postponed. Some of these launches may be delayed to the fourth quarter of 2020.
Like other sectors in the economy, the property industry too looks to the government to provide some stimulus. The most immediate would be for banks to reschedule and restructure all facilities granted to developers and to consider a moratorium on all repayments. We also urge the housing ministry to grant an extension of time for all housing completions for ongoing projects and Certificate of Completion and Construction for those with practical completion with LAD (liquidated ascertained damages) waiver.
To stimulate the property sector, the most effective way is to reintroduce the HOC. Hopefully this can be done as soon as practicable.
To fast track economic recovery, the government should review all cooling measures and lift them where they are no longer relevant so as to keep an industry that has a vast multiplying economic impact.
Anwar Syahrin Abdul Ajib
UEM Sunrise managing director/CEO
We cannot deny the economic impact of the COVID-19 pandemic, plunge in oil price and change in government. The property sector, like most industries, will be going through a tough business environment till the end of the year. With the expected drop in GDP growth numbers, we will likely see reductions in sale forecast mid of this year, the extent of which is something we will have to wait and see. However, I see this as an opportunity for us to reflect inwards. It is time for us to regroup, rethink and innovate our business operations to make it more cost- effective and create value.
What we are most concerned about is the magnitude of the economic and political headwinds on the livelihood of the people in retaining jobs, income levels and social wellbeing. People will be more conservative in spending, causing big-ticket expenditures like housing and cars to take a back seat.
Regardless, the priority now is for all parties, namely the government and industry players, to work together in implementing measures to alleviate the financial burden of the people and small/medium industries to keep the economy going.
The situation we are experiencing at the moment is not localised or regional, it is global. It will take time to recover and for our country, first and foremost we must have stability in politics and government. Only then can appropriate measures be made to revitalise our economy without fear of changes in direction and policies.
Firstly, we need to provide our utmost cooperation to the government to improve the economic condition which is in dire need of rejuvenation. Consequently, for the property sector, we the developers need to preserve the market from further decline, by being more cautious in launching new products and only do so based on surgically precise market and customer requirements to bring stability to the industry.
In the medium term, we hope to see reintroduction of measures which have worked in the past, such as the HOC. It is also time to review cooling measures such as reducing (and rebasing) the Real Property Gains Tax (RPGT), harmonisation of price threshold for foreign buyers across states and review of the loan-to-value ratio cap for third home purchase, to bolster the investor market.
In the long term, bolstering consumer sentiment is key. People, investors and industry players must be confident about what the future holds. Offering market incentives to boost the economy is futile without policy certainty. In particular, there needs to be continuity in commitment to catalytic projects so that they attract investment opportunities and high-income jobs sustainably.
Gan Yee Hin
Platinum Victory executive director
Platinum Victory was established in the late 90s during the Asian financial crisis, but still prevailed to become what it is today. Even when the current situation affects the whole economy, property is a necessity and there is always a demand for it.
As we can see over the years, it has been challenging and competitive, so there is a need for industry players like us to step forth to be more creative and innovative in our approach.
Leveraging our experience through the highs and lows over two decades, we believe we are able to pull through this again. As with every crisis, there is an opportunity. It really boils down to how we take the opportunity at the right time, as newfound opportunities will arise to replace old ones.
It will take some time for economies across the board to recover from a sudden plummet that is greater than expected in the current situation.
Perhaps this is a chance for all parties in the property industry, including individuals, private businesses and the public sector to review how we make decisions.
Understandably, the government is also doing what it can to minimise the impact of COVID-19 on our economy. Amidst this difficult situation, we believe that all parties should support one another to get back on our feet and emerge stronger in due course.
At Platinum Victory, we believe tough times don’t last. Tough people do.
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