KUALA LUMPUR: Signs of financial distress in the country are getting more prevalent and clearer as the COVID-19 impact bites deeper into Malaysia's economy, resulting in rising unemployment and shrinking incomes.
The Department of Statistics Malaysia's May 2021 data showed that the jobless rate was at 4.5 per cent, involving over 728,000 workers, although it dropped marginally from 4.6 per cent in April 2021.
The economic impact has not been isolated, rather the damage is spreading to other sectors, including property despite the various relief measures and loan moratoriums.
The Household Income Estimates and Incidence of Poverty Report 2020 has revealed that 20 per cent of the Middle 40 (M40) income group, that is those earning between RM4,850 to RM10,959, has shifted down to the B40 group due to the pandemic, while among those from the Top 20 (T20) category, 12.8 per cent has shifted down to the M40 group.
This means some property owners may have to offload properties to stay afloat.
While the vaccination rate, which is on track to achieve herd immunity by October 2021, could shed some light and hope, the future remains unclear on how fast the economy can recover from the damage done it.
As of Aug 8, 2021, over 24 million doses of COVID-19 vaccines have been administered in Malaysia under the National COVID-19 Immunisation Programme (PICK). By percentage, this means that 48.3 per cent of the country's population have received the first dose of the vaccine while 26.9 per cent have completed the full two doses.
Surviving the Pandemic
Christopher Tan, 47, is one of many property owners who have had to let go of their properties during the pandemic.
As global travel came to a halt, Tan, who resides in Singapore, lost his job as a pilot in June last year.
To sustain his livelihood with his wife and two children, he had no choice but to offload his apartment in Cyberjaya last August.
"It was a difficult decision to make but that was the fastest way to get some cash although it was at a loss. I bought that apartment for RM826,000, but sold it at only RM450,000," he said.
At the end of 2020, home loan rejection rates in Malaysia stood at 28 per cent, according to data by Bank Negara Malaysia.
Among the reasons for the rejections was that borrowers were already highly indebted, and have a poor credit history with little residual income after taking into account monthly living expenditures and existing financial obligations.
According to the National Property Information Centre (NAPIC), in 2020, the overall property sector recorded 295,968 transactions worth RM119.08 billion, which was a 9.9 per cent year-on-year decline in volume and a 15.8 per cent drop in value compared with 2019.
Meanwhile, a total of RM117 billion is expected to be withdrawn from the Employees Provident Fund (EPF) this year, largely from the i-Sinar and i-Citra programmes.
This huge amount shows that the people continue to be under pressure financially but have had to opt for the withdrawal, although it would impact their future savings in the longer term.
Oversupply, Overhang and Overpriced
The fact is, even before the pandemic, the property sector was already facing the issues of oversupply and overhang and for the longest time, Malaysia has been known for its house prices being unaffordable compared with the average income level - a combination of factors that has knocked prices off a little.
Regardless, house prices have remained unaffordable.
PropertyGuru Malaysia noted that in the first quarter (Q1) of 2021, the overall property asking prices inched down by 0.84 per cent quarter-on-quarter (q-o-q) and 1.79 per cent year-on-year (y-o-y) to 87.86 index points due to buyers' apprehension.
NAPIC has also revealed that the number of newly launched residential units dropped significantly to 5,919 units in Q1 compared with 14,865 units in Q4 of 2020.
PropertyGuru's latest Malaysia Property Market Index (MPMI) report said the overall property supply in the market spiked by 34.53 per cent year-on-year and 11.94 per cent quarter-on-quarter in Q2 this year.
The surge in property supply in the country in Q2 was likely driven by an increase of homes being put up for sale in the secondary market under the current economic climate, according to the property technology company.
The upward trend in property supply was observed across four key economic states covered by the MPMI, namely Kuala Lumpur, Selangor, Penang, and Johor, which saw a y-o-y increase of 16.91 per cent, 48.95 per cent, 40.32 per cent, and 17.47 per cent respectively.
Cautious Mood
AmInvestment Bank Bhd, in a recent research note, has maintained a "neutral" stance on the country's property sector for the second half of 2021 (H2 2021), with a cautious outlook.
The investment bank said the various movement and economic restrictions could lead to a slower-than-expected recovery in the sector.
It noted that the local property sector has been languishing in the last five to six years after an upswing in mid-2013 when the House Price Index saw double-digit growth.
The investment bank is less optimistic in terms of sales in the second half of the year as momentum could slow down from mid-May with the imposition of the Movement Control Order (MCO) 3.0.
"Last year, when the first MCO lasted 1.5 months (from March 18 to May 3, 2020), housing sales fell 11 per cent quarter-on-quarter (q-o-q) in Q2 FY2020 and thereafter rebounded by 121 per cent q-o-q in Q3 of 2020.
"However, we do not expect the same pace of recovery in H2 2021 as economic activities are only allowed to resume in phase three which is targeted to be in September under the National Recovery Plan (NRP).
"Hence, we do not anticipate positive earnings surprises over the next six to 12 months," it said.
Beyond the Pandemic
Real estate sales and media company Juwai IQI reckons it is not all gloom and doom for the property sector, especially when a recovery is expected to unleash pent-up demand both in Malaysia and elsewhere.
The group's co-founder and chief executive officer Kashif Ansari said Bank Negara Malaysia's stance in keeping a check on both the ringgit's structural stability and price inflation would keep the economic momentum going amid the COVID-19 impact.
"We believe the real estate sector remains resilient and expect property prices to appreciate by three to five per cent next year due to strong demand, the economy reopening, and an accommodative monetary policy."
He said real estate remains a safe asset for sophisticated and smart investors.
-- BERNAMA
Bernama
Tue Aug 10 2021
Malaysia has been known for its house prices being unaffordable compared with the average income level - a combination of factors that has knocked prices off a little. -Pic by Astro AWANI
Iran's supreme leader says Hamas leader's death will not halt 'Axis of Resistance'
The "Axis of Resistance", built up with years of Iranian support, includes Hamas, the Lebanese Hezbollah group, the Houthi movement in Yemen, and various Shi'ite groups in Iraq and Syria.
Putin says Russia willing to seek compromises between Iran and Israel
Russia is ready to help seek compromises between arch-foes Israel and Iran, President Vladimir Putin said on Friday, saying these would be difficult but possible.
What proposals will Russia push at the BRICS summit?
The proposal is also to establish a BRICS reinsurance company to allow uninterrupted shipment of goods and key commodities between members.
Indonesia's free meals plan in the spotlight as Prabowo readies for office
Prabowo calls the programme one of the main drivers of economic growth, eventually set to add an estimated 2.5 million jobs.
Astro AWANI's revamped English news website, AWANI International, launches on Oct 21
Astro AWANI's revamped English platform delivers in-depth global news and expert analysis to keep you informed on key developments.
Israeli strikes kill 33 people in Jabalia refugee camp in Gaza, medics say
Residents of Jabalia said Israeli tanks had reached the heart of the camp after pushing through suburbs and residential districts.
Liam Payne's ex-partner calls for media restraint after 'painful' death
Cheryl Tweedy used her statement to urge the media to remember they had a seven-year-old son, Bear, who could read the reports.
Analysts: Indonesia's strong MoF leadership team to boost investor confidence
Sri Mulyani Indrawati as head of Indonesia's Ministry of Finance is expected to instil confidence among investors.
Biden offers both a carrot and a stick to Israel as his term nears an end
Israel has frequently resisted US advice and has caused political difficulties for the Biden administration.
Putin says BRICS will generate most of global economic growth
Russian President Vladimir Putin will host a summit of the group in the city of Kazan on Oct. 22-24.
ISIS Malaysia's perspective of Budget 2025
An excellent rakyat-centric budget under the overarching principle of a caring and humane economy.
Budget 2025: Record increase in STR, SARA aid initiatives
The government will provide a significant boost to the Sumbangan Tunai Rahmah (STR) and Sumbangan Asas Rahmah (SARA) initiatives next year.
Budget 2025: EPF contributions to be made mandatory for foreign workers – PM Anwar
The government plans to make it compulsory for all non-citizen workers to contribute to the Employees Provident Fund (EPF).
What policies to expect from Indonesia's new President Prabowo
Prabowo will be open to foreign investment, his aide has said, such as by offering investors management of airports and sea ports.
Budget 2025: Govt allocates RM470 mil to empower women's participation in PMKS
The Women's Leadership Apprenticeship Program will be intensified as an effort to produce more female corporate personalities.
Israel sends more troops into north Gaza, deepens raid
Residents of Jabalia in northern Gaza said Israeli tanks had reached the heart of the camp, using heavy air and ground fire.
Indonesia ramps up security ahead of Prabowo's inauguration
Prabowo Subianto will be sworn in as Indonesia's president on Sunday with Vice President-elect, Gibran Rakabuming Raka, also taking office.
Immediate allocation of RM150 mil for local authorities, DID to tackle flash floods
Datuk Seri Anwar Ibrahim said this allocation is intended to address the recent flash floods that hit the capital and several major towns.
Budget 2025: Sabah, Sarawak to continue receiving among highest allocations - PM
Sabah and Sarawak continues to be prioritised under Budget 2025, with allocations of RM6.7 billion and RM5.9 billion respectively.
NFOF will be operational in November 2024 with funding of RM1 bil
PM Anwar Ibrahim said NFOF will support venture capital fund managers to invest in startup companies with RM300 million set aside for 2025.