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Impact of the General Election on Properties

The General Elections (GE) is the buzzword on the lips of everyone in the industry and it is for good reason.

Will it bring a boost to the property market or will it depress prices further? Or, will the status of the market remain as status quo? The movers and shakers of the real estate market express their opinions of the ramifications of GE on the property market.

 

Not Much Significant Impact

 

The Managing Director of IJM Land Edward Chong opines that the election result is not expected to have any significant effect on property prices unless there is a drastic change in Government policies post-GE.

Prior to the GE14, some businesses making new commercial or industrial investment may adopt a wait-and-see attitude for investment decisions.

Once the political landscape is clearer post-GE14, business will resume normally as the election result will provide clarity for their investment decisions as well as the nation’s economic direction and business policies.

 

 

Another industry veteran who concurs with this viewpoint is James Wong, Managing Director of VPC Alliance Sdn Bhd states the market factors are currently affecting the slowdown in property market and there will be problems such as oversupply in property market, affordability issues, difficulties in getting loans and constant wages as well as disposable income remaining flat.

 

Uncertainty Affecting Investors’ Sentiments

Before to GE14, many believe the sense of uncertainty may have affected investors’ sentiments to some degree which is normal due to political situation being ambivalent together by a weakening economy and the fluctuating depreciation of the currency.

 

Sr Adzman Shah Mohd Ariffin, Chief Executive Officer/Chief Real Estate Consultant of ExaStrata Solutions Sdn Bhd expects post GE14 to encourage investors as well as homebuyers to return to the market with renewed enthusiasm.

Foreseeing that it will take a bit of time for the political situation to stabilise, the first view of first half of 2018 (1H18) will see property prices “staying as they are”. However if the GE14 results bring about drastic change in Government whether at State of Federal level, he speculates that the market will need more time to stabilise before picking up again later in the second half of 2018 (2H18).

 

Property Prices to Stabilise and Increase

After plenty of talks about the uncertainty evading the property market, property prices, according to a certain spectrum of the market will see property prices stabilising and possibly increasing later.

 

Erick Koh, Immediate Past President of the Malaysian Institute of Estate Agents (MIEA) 16th President anticipates property prices to be stable for now while there is a bottoming out for the luxury properties sector.

In fact, he goes so far as to say that prices are expected to increase as the inflationary factors of rising costs of many products will influence the construction costs.

After almost three years of slowdown, many projects have undergone a repositioning or redesign to build units that meet market demands.

Due to the increasing costs of land and buildings, smaller building units are expected to be launched, thus reducing the overall value of properties for sale. Koh adds that the liquidity situation is still a problem with difficulties arising in procuring loans with up to 30% – 40% comprising the loan rejection rate.

Moreover, The Government needs to make available cheaper land with reduced compliance costs to help subsidise developers. Luxury properties will be facing under a lot of pressure as many condominiums are breaching the RM1 million selling price but rental return remain very low at 2.5% – 3.5% which is not a good sign for investors with little hope of price appreciation.

 

Silver Lining and The Feel Good Factor

Group Managing Director of Crest Builder Holdings Berhad, Eric Yong says per usual, during the GE, both the Government and opposition parties would make various promises in their manifesto to win the people’s hearts for more votes in which most of the time, it involves the property sector.

The impact of the GE14 is there are more affordable housing on offer with the ruling Government’s side having created various schemes such as PR1MA (Perumahan Rakyat 1Malaysia), PPA1M (Perumahan Penjawat Awam 1Malaysia), Dasar Rumah Wilayah Persekutuan (RUMAWIP) etc. while the Selangor State Government also created Rumah Selangorku,

On the flip side, he admits the biggest concerns are that these incentives could potentially create an oversupply situation for affordable housing, especially in the rural areas. However, he believes that there will be a pick-up for the market which will be likely to be transparent in second half of 2018 after the GE14.

 

Status Quo and More for Real Estate

There will be a mixed bag of status quo in the impending GE14 as well as its effect post-GE.

Khairul Anuar Shaharudin, Partner or Lawyer of Khairul, Suhaila & Hazlina believes the pros of upcoming GE14 is the immediate feel good factor and more public housing schemes as more foreign direct investment will come in.

On the other note, Khairul anticipates that before the elections, there will be a prime pumping of contracts and after it, property prices will start to shoot up but there will be no to less takers.

After the GE14, it depends on the winning government will boost the property market together with Government Linked Companies (GLC) to control the landscape of Malaysia’s major developments in Kuala Lumpur such as Bukit Bintang City Center, Warisan Merdeka Tower and Tun Razak Exchange.

More affordable housing also will be pushed towards areas such as Seremban, Rawang, even to Ipoh, Genting (Bentong/Bukit Tinggi) and even Melaka with the advance of technology (fast train).

All in all, the GE may herald subtle and more obvious changes that will impact the property market, but much remains to be seen as how this will all pan out in the end.

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