Analysts are predicting a recovery in Malaysia’s economy towards Q3 of the fiscal year. Owing to the drastic effects of the pandemic, the economy had plunged in the first half of the year but is expected to see some relief in the second half of the year in Q3 followed by a considerable potential rebound in Q4, according to experts
On March 18, the Malaysian government had announced a strict movement control order (MCO) which led to the sharpest plunge in the economy since November 1991. According to AmBank Research, various factors resulting from the MCO, such as the disruption of the supply chain, slow global demand, travel restriction, and weak commodity prices will contribute to the negative growth
in the first half of 2020.
However, Bank Negara Malaysia
(BNM)’s significant reduction in policy rates, the RM250 billion Prihatin economic stimulus, the slow but steady progress in public projects, and massive spending in infrastructure are expected to cushion the blow of the pandemic.
Q1 2020 Results Speak Otherwise
This being said, the Q1 economic results were sharply different from the predictions. Malaysia actually registered menial growth in the Q1 results. While the word on the street had predicted a median decline of 0.1 per cent, the registered year-on-year expansion in the gross domestic product (GDP) turned out to be 0.7 per cent.
economist Wellian Wiranto confirmed this, stating that low oil prices, supply chain disruptions, and the virus outbreak had led them to predict a 0.4 per cent year-on-year reduction. Surprisingly, the global and domestic measures taken to combat the pandemic led the economy to moderate sharply.
As economic activities are expected to resume due to a less restrictive MCO in the second half of the year, the economy is expected to slowly pick up its pace from Q3 leading the way well into Q4 followed by accelerated growth in 2021.
Effects on the Property Market
Malaysia’s property market too will feel the effects of the pandemic-induced economic slowdown in the first half of 2020 but is expected to grow in 2021. Dato' Tan Kean Tet, managing director of Iconic Worldwide Berhad confirms this. Malaysia’s property sector will be “modest”
towards the end of the year 2020, he says, and witness a gradual recovery in 2021.
He adds that the past trends in Malaysia’s property sector have a history of remaining active even throughout turbulent times and so they’re optimistic regarding a post-pandemic recovery. For this, property developers will need to evolve in their offerings. Bundling their property with various packages and offering better, value-for-money products are some ways to encourage more purchases.
Existing property prices are not likely to reduce, he comments, as doing that will ring unfair to people who have purchased similar properties previously. However, new offerings will bear more competitive prices. Hopefully, additional measures and assistance from the Bank Negara Malaysia will help the market curb these effects
. Tan hopes for special housing loan interest rates and a higher rate on loan approval.
The MCO has considerably reduced property transactions in the country, which resulted in stagnation in property prices
. Penang property development launches too are far and few as most of the property companies in Penang have already put their launches on hold since the end of last year and early 2020.
These reduced launches will result in less competition, which would, in turn, soften the blow for a while, Tan predicts. For customers looking to buy property in Penang, this is a blessing in disguise.
Since international travel and vacation have been restricted due to the government’s measures, the current global situation has established a trend in which people are more in favour of moving away from the cities to larger, more spacious residences in the suburbs.
In a Nutshell
Even though the country has felt economic tremors of the pandemic, the second half of the financial year is expected to be better than its first half.
Property buyers will get some relief thanks to reduced policy rates and fewer launches in the property market this year.
Hopefully, the Q3 2020 results will bring a sharp ray of hope for a more productive and fulfilling 2020. For more information about the property market, feel free to get in touch with us.