A total of 27,541 properties with an estimated reserve value of RM14.2 billion went under the hammer in 2020, a year-on-year decline of 25% and 28% in terms of cases and value respectively, according to AuctionGuru.com.my data.

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Zooming into auction market 2020

Not only did the number of foreclosure properties drop significantly last year, but the total number of auction properties was also the lowest in the past six years.

Although Malaysia has recorded the lowest number of foreclosure properties last year, AuctionGuru.com.my executive director Gary Chia says the downtrend did not reflect the real market condition.

“The decline is mainly due to the implementation of movement control order (MCO) and loan moratorium facilities given to housing loan borrowers to cushion the economic impact of the Covid-19 pandemic,” he tells EdgeProp.my.

To recap, Bank Negara Malaysia’s six-month moratorium allowed borrowers to delay their repayments until Sept 2020. Those eligible for the targeted moratorium extension enjoyed a deferment period until the end of last year. Both of these initiatives helped delay the impact of the Covid-19 on the property market.

Hence, what’s worrying is when the moratorium ends and borrowers have to start servicing their monthly loan instalments. If the nationwide economic condition remains sluggish and the majority are unable to manage their cash flows, the market will be seeing a rise in the number of foreclosure properties starting next year, stresses Chia.

On the auction market, Chia notes there are always some good deals in established locations which have reserve prices of 30% to 40% lower than market prices.

However, the investors’ appetite is not there, as they are either conserving cash or looking at other liquid assets, he says, adding that buyers who are looking for foreclosure properties are those who are looking for properties in their desired locations to own-occupy.

Uncertainties on future capital appreciation and rental yield as well as the property oversupply condition, especially for high-rise residential segments, are the key reasons investors are taking a wait-and-see approach on property investments, he explains.

Although there are keen self-occupiers who are looking for bargain deals in the auction market, he notes that the numbers of concluded deals are not significant.

Moving ahead, it is important for us to take a cue from the upcoming quarterly foreclosure data to form better predictions towards the direction of the local foreclosure market and recovery of the Malaysia property market, concludes Chia.

This story first appeared in the EdgeProp.my E-weekly on May 21, 2021. You can access back issues here.

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