Written by: Henny Maherah
The Malaysian economy is expected to shrink to 2.5% from 4.2% during the recovery period. Should property plans still be made during these uncertain and turbulent times?
What is the impact of COVID-19 on the Malaysian property market?
1. Less interest from foreign buyers
Travel restrictions have curbed foreign investments from entering the Malaysian economy. Foreign buyers are thus unwilling to invest in the local housing market. Still, there remains a small group of foreign buyers who are willing to invest in Malaysian property.
These buyers flock from countries, such as the United States, that have experienced greater shocks to the property market as a result of COVID-19. They are keen to invest in countries with better management of the COVID-19 outbreak, such as Malaysia. However, this group of buyers are only the minority.
The unveiling of Perikatan Nasional has also increased the uncertainty in the economic climate of Malaysia. Foreign buyers may be deterred from investing in property due to the recent political turnover and divert their investments to more politically stable countries instead.
2. More challenges in securing homes
Buyers are postponing their property purchase as they are more concerned with more pressing needs like employment and daily necessities. Particularly for the lower income group, securing a home has become more difficult due to lost income and the absence of savings.
Local buyers are now adopting a wait-and-see attitude until the impact of COVID-19 has subsided. While this appears to be the safest approach, others say that now is an optimal opportunity for Malaysians to secure a home.
3. Delayed property launches
Many property developers are delaying their new launches due to service disruptions and supply cuts. With the national slowdown, auction market listings and bargain opportunities have spiked dramatically, with properties selling for as little as 50% less than their original reserve prices.
Property developers are also more willing to lower their prices to entice buyers. Their focus has shifted to clearing off overhang units at reduced prices.
What are the government initiatives to increase home ownership?
1. COVID-19 recovery measures
The six-month moratorium deferment package was also introduced by Bank Negara to provide leeway for loan borrowers during the COVID-19 pandemic. For homeowners, this means that mortgage loans would be deferred from April to September 2020, helping them avoid defaulting on loans.
Owners of short-term rental properties can also utilise the loan deferment till September.
2. Existing housing policies to improve housing affordability
One of the aims of Budget 2020 is to promote access to housing. The RM10 billion Rent-To-Own (RTO) Financing Scheme was introduced in 2018 as part of the National Housing Policy (NHP) 2.0. Running in its second year, the RTO scheme targets the bottom 40% income group (B40). This scheme allows Malaysians within the low-income bracket to rent their homes for five years and apply for a home mortgage in the sixth year.
According to the Housing and Local Government Minister, Zuraida Kamarrudin, when low-income earners consistently pay rent, they are able to build up their credit score. This payment record could further enhance their credibility when they apply for a mortgage in the sixth year. Through this scheme, the B40 targeted group are able to increase their access to homeownership.
3. Closer partnerships between property developers and the government
The Affordable Housing Policy was introduced for property developers to focus housing development towards the lower and middle income group in Malaysia. Property prices are fixed between
RM90,000 to RM300,000 depending on area and location. Property developers are bound to a minimum size requirement of no less than 900 sq ft. Necessary infrastructure and amenities must also be included. These guidelines ensure that all Malaysians have access to safe and quality homes.
Given the active improvement in government initiatives coupled with greater housing bargains in the current market, Malaysians should definitely capitalise on the current soft property market to secure their own home. With property prices slashed up to 50% off its original prices, it’s a golden opportunity to land their dream home.
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