Henry Butcher Malaysia Perspective 2021

Press Release: Henry Butcher Malaysia Perspective 2021

DATE: 1 FEBRUARY 2021 

PRESS STATEMENT ON THE RELEASE OF HENRY BUTCHER MALAYSIA  PERSPECTIVE 2021 

The Henry Butcher Malaysia group is pleased to present its annual report on the review and  outlook for the Malaysian property market in 2021.  

Mr Tang Chee Meng, the Chief Operating Officer of Henry Butcher Real Estate said “overall, the property market in 2021 is expected to be flattish or record a slightly better performance  than 2020, as the start of the vaccination programme in the country would help in controlling the covid-19 pandemic and start the economy on a recovery path. However, with the recent  rise in infections and the implementation of MCO 2.0 and the declaration of emergency, the  hoped-for recovery may be delayed till 2022. He also presented the key highlights of the report:  

RESIDENTIAL SECTOR  

• The overall situation is expected to continue to be challenging as the pandemic has yet  to be brought under control and the political situation in the country is still full of  uncertainties. In fact, MCO 2.0 has affected businesses and dampened investors’ and  consumers’ confidence and this will delay the recovery of the market, if the MCO is  prolonged. 

• The positive thing to look out for is the rollout of the Covid-19 vaccination programme,  expected to commence after receipt of the first batch of vaccines expected by end  February. Once herd immunity is developed, the economy and consequently, the property  market will be able to stage a sustained recovery. Further, buyers may take advantage of  the current low interest rates to buy their dream homes and housing developers are  expected to intensify their marketing efforts to push sales before HOC 2020 ends in June.  

• The lockdown during the MCO has made property developers realise that they cannot  depend on traditional methods of marketing alone and many, if not all developers, have  added digital marketing tools and technology to their marketing arsenal. This will help  them in the long run to reach out beyond the local market. 

• Foreign investors may also return to the market once international borders are lifted. • The advent of the work from home culture has made internet connectivity as well as  private work places within the home very important considerations in house design and  new homes rolled out by developers from now on would likely place more emphasis on  this aspect of home design.  

• Landed residential properties are expected to remain in demand whilst the huge overhang  of high-rise residences, especially serviced apartments, will make this segment of the  market more challenging. 

• More developers have re-focused their attention on affordable homes priced under  RM500,000 and this market segment will continue to be the main focus in 2021. • The commencement / completion of various major infrastructure projects such as the  EKVE (East Klang Valley Expressway) scheduled for completion in Q3 2021, the Rapid Transit System (RTS) as well as the Kulai Iskandar Data Exchange (Kidex) projects in  Johor, the ECRL and the Pan Borneo Highway in East Malaysia will boost demand for  properties located near the interchanges of the highways or within the vicinity of the  developments.

OFFICE SECTOR  

• Even before the pandemic, the office sector in the Klang Valley was already experiencing  some downward pressure on occupancy and rental rates due to the substantial new  supply that has come on to the market over the past few years. The oversupply situation  was exacerbated by the adverse impact of the pandemic and the ensuing lockdowns on  the economy imposed by the government to curb the spread of the covid-19 virus. The  government’s directive to companies to adopt work from home practices for their staff as  well as business closures and the poor business outlook compounded the problem as this  led to companies deferring expansion plans and an overall decline in demand for office  space.  

• The future completion of a number of mega office projects currently being built eg.  Merdeka 118 by PNB and a few other private developments will add substantially to the  supply of office space in Kuala Lumpur, putting additional pressure on overall occupancy  and rental rates. 

• The increase in vacancy rates of office buildings in the Klang Valley may however lead to  some developers shelving or deferring their office developments and this will ease the  pressure on the oversupply situation. 

• The office market in smaller towns like Ipoh, Kota Bahru and Kuala Trengganu are  however fairly stable due to limited supply of purpose-built office buildings and no or very  little new supply coming onto the market. 

RETAIL SECTOR  

• A total of eight new shopping centres and two mall extensions were opened in the Klang  Valley in 2020, putting an additional nett floor area of more than 2.7 million sq. ft. onto the  existing supply  

• The retail sector in the Klang Valley will continue to see a shakeout where poorly designed  and malls in inferior locations will be forced to close or be converted to some other  alternative uses. 

• New shopping centres will face challenges in filling up space and some may defer opening  if they are unable to open at a satisfactory level of occupancy. 

• Many retailers, unable to sustain operations during this difficult period, took the  opportunity to close unprofitable outlets, downsize or stopped operating completely and  this included venerable established names like Robinsons and Tangs.  

• New malls with foreign retailers making their debut in Malaysia will offer shoppers new  choices and different shopping experiences which will help to draw customers.  • Some of the new retailers/restaurants opening in Kuala Lumpur are Taco Bell (Cyberjaya),  Tom Ford (KLCC), Five Guys (Genting Highlands), David Rocco (Suria KLCC), Don Don  Donki (Lot 10) etc 

INDUSTRIAL SECTOR 

• The industrial sector was not spared by the pandemic as supply chain and production  were disrupted by the SOPs implemented under the various phases of the movement  control orders. All was however not doom and gloom as manufacturers of gloves, face  masks, PPE equipment, health equipment and products benefitted from the increase in 

demand for such products. Warehousing as well as logistics service providers also  benefitted from the e-commerce boom experienced during the lockdowns.  • Despite registering a decline in the volume and value of transactions, the industrial  property sector was the best performing of all the property sectors. 

• With the start of vaccination programmes in many countries, the pandemic may be  brought under control and this will spark a revival of the global economy and benefit major  exporting nations like Malaysia. 

• The industrial property sector is expected to see a recovery in 2021 

HOSPITALITY & LEISURE SECTOR 

• The tourism sector was one of the most badly hit economic sectors as foreign tourists  were not allowed into the country as part of the government’s efforts to fight the covid 19  pandemic. Domestic tourism also dried up during the period of the MCO when inter-district  and inter-state travel were prohibited and only recovered when the travel restrictions were  lifted under the CMCO and RMCO.  

• Hotels and tourism dependent businesses were badly affected and many hotels either  went on a cost cutting or retrenchment exercise or closed down completely. More than  200 hotel and tourism operators have shut down operations since march 2020.  

• The cancellation of Visit Malaysia Year 2020 dealt a huge blow to the tourism industry • Until international borders are reopened and domestic travel restrictions are removed or  at least relaxed, the hospitality sector is expected to continue to go through very tough  times and will unlikely be able to see any sustained recovery in 2021 

Mr Long Tian Chek, the founding partner and director of the Henry Butcher Malaysia group  expressed his hope that the government will extend the HOC and continue to come up with  additional measures to help the property industry tide through this difficult period and stage a  sustainable recovery. 

The full report can be downloaded here.

— End of Press Release —

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