APRIL - JUNE 2020 Strange Times Today, An Uncertain Tomorrow By Tang Chee Meng We are living in strange times. When mid 80’s, the Asian Financial Crisis in systems of even developed countries have we ever been told that staying 1997 which preceded the Nipah virus and causing much disruption, misery at home, becoming a couch potato outbreak in 1998, the SARS outbreak in as well as deaths. It is still unsure when watching Netflix and Astro is considered 2002/3 and the Global Financial Crisis the pandemic can be brought under a healthier pursuit than going out to in 2008/9 all pale in comparison with control although there are positive the park, jogging or cycling? Where what we are currently going through. signs that China, due to the disciplined EPL football games are either played The worst thing is that this affects the approach adopted, appears to have in empty stadiums devoid of any whole world, including the two largest turned the corner in its war against the spectators or completely cancelled economies, USA and China as well as Covid-19 virus. altogether. Europe, South America and Africa. The situation in the USA has gotten These are nevertheless trying times. The Covid-19 pandemic which started worse as it has now become the Being a veteran with 40 years of in Wuhan, China (I would not use the country with the most Covid-19 cases involvement in the property industry, word “originated” as there are some whilst Italy remains the country with I have gone through quite a few quarters who believe that the virus was the highest number of deaths. India is property cycles but this is the most brought into Wuhan from the USA) has grappling with the effects of a poorly depressing period that I have ever paralysed the entire world economy executed lockdown which has resulted experienced. The recession in the besides wrecking national health in the poor and homeless being carrying out property viewings and signing of sale & purchase agreements. Some developers and agents have nevertheless claimed to have closed some sales to foreign investors during this period although the numbers are unlikely to be significant. Stimulus Injections The government has recently announced a RM230 billion stimulus package on top of the earlier RM20 billion package to help the Malaysian economy ride out this difficult period. Plotting from the John Hopkins Coronavirus Resource Center shows that almost every country in the world have infected cases of the Covid-19. The moratorium on loan repayments which includes housing mortgages for displaced and without food whilst daily may be unable to service their loan six months will provide some breathing paid workers employed in the informal commitments and this may lead to space and help affected borrowers sector, being asked to leave their rented an increase in non-performing loans to tide through the current difficulties premises after their employers were (NPLs) which will put a strain on the and hopefully prevent more loans from forced to cease operations during the banking system as well as result in a turning into NPLs. lockdown, came out and congregated further erosion of investor confidence. in large numbers and walked long Nevertheless, there have been distances back to their hometowns. Property developers will be hard put complaints from SMEs, players in the How soon these and other countries to come up with the right strategies tourism industry and others badly are able to get a grip on the situation to address the significant changes in affected by the Covid-19 pandemic and stop the spread of the Covid-19 market conditions and this may lead that the incentives announced by pandemic is anybody’s guess. to developers holding back on new the government are insufficient and launches whilst dropping prices to have appealed for more assistance. In Malaysia, we have not been spared boost sales. They have also appealed for some as the Covid-19 outbreak has escalated leeway/relaxation to the MCO to since the Sri Petaling religious gathering. To sum up, the hope for recovery in the enable industries/service providers Unfortunately, this coincided with the residential property market following who are involved in producing/ period of uncertainty arising from the the success of HOC 2019 is unlikely to transporting essential goods and change of government in Malaysia and materialise and instead, the property foodstuffs to continue and in fact step coupled with the substantial drop in market will face an uncertain and up production and facilitate distribution crude oil as well as CPO prices, this challenging year with sluggish sales of these products. The government has created a triple whammy on the and a further decline in prices, reduction may also perhaps instruct the banks Malaysian economy and property market. in the number of new launches and to defer foreclosure proceedings on an increase in NPLs and number of mortgages which turn sour during this Economic Pressure properties put up for auction. period so that the bad loans situation These unforeseen events will have a does not become a huge burden on detrimental impact on the country Local buyers appear to have adopted the banking system. and bring down economic growth. The a wait and see attitude as they are Covid-19 crisis in particular, has forced worried about the slowdown in the The government has responded to businesses to close temporarily (some economy and the oversupply situation the appeals by topping up another permanently) whilst all industries, in certain market segments eg. service RM10 billion to help SMEs in the form of with the worst hit being the tourism apartments and sohos as well as high- enhanced wage subsidies under the related industries, have experienced end, high rise residences. PRIHATIN package, waiver/discount on supply disruptions, production cuts rentals for premises rented from GLCs, and termination of orders. The longer Foreign buyers have recently also held special PRIHATIN for microenterprises, the lockdown period, the more hard back on investing due to the political reduction in levy payment for foreign hit will be businesses especially SMEs uncertainty and the confusion whether workers and other measures. which have limited cash reserves. This the proposed reduction in the minimum will result in companies adopting pay price threshold for foreign buyers as For the property industry which includes cuts and retrenchments to stay afloat announced in Budget 2020 will be those in the property development and ultimately lead to an erosion of implemented. business as well as those providing confidence and have a big impact not professional services to the industry, it is only on the stock market but also the The travel restrictions implemented by hoped that the government will come property market. the government as well as the Movement up with a comprehensive strategy to Control Order (MCO) to counter the help the industry to get back on its The uncertainties in the political scene Covid-19 outbreak has disrupted travel feet. With the implementation of the have also affected investor confidence plans of potential investors who have MCO, the property industry has more and property investors prefer to stay now delayed or changed their plans or less come to a standstill as no on the sidelines until things clear up to invest in properties in Malaysia and construction works can proceed whilst for the better. Further, some borrowers prevented even local buyers from property sales have come to a halt as developers’ sales galleries are closed payment schemes for projects that they a more important component of the and property viewings are not allowed have launched. This will be a good developer’s marketing plan. to be carried out. time for house buyers and investors with cash to spare to pick up their dream To move ahead with the times, To help the industry tide over these homes at lower prices and with more developers will also improve their difficult times, the government attractive payment terms and sales service levels/interaction with their can continue with the stamp duty packages which they will never dream customers by introducing loyalty exemptions offered during HOC2019 as of getting a few years back when the programmes as well as mobile apps well as lower interest rates on housing property market was still hot. which the customers can utilise loans and relax lending criteria by the to request for information, make banks. They can also consider offering For those with cash reserves in hand, it payments, request for services, set certain incentives to developers such would be a great opportunity to pick appointments as well as search as discounts on statutory contributions up a property or two when the market services like finding nearby restaurants or at least deferred payment schemes is in a slump and prices are down and and other consumer services to help developers preserve their cash hitch on the ride up when the market flow and survive the current difficult recovers eventually. Finally, the recovery of the Malaysian times as well as provide a lower cost property market will greatly depend environment to enable the developers In China, now that the worst of the on how the pandemic pans out not to reduce selling prices. At the same pandemic appears to be over and only in Malaysia but also globally. If time, they should allow developers to the economy is moving into a recovery the situation worsens, it could lead to apply for extension of time to complete mode, the property market in some a global recession and this will lead their projects due to the mandatory cities have shown a rebound with prices to an erosion of confidence and the stoppage of work during the MCO moving back up again.