Developers welcome more government assistance

Hock Seng Lee (HSL) headquarters offices and La Promenade Mall.

KUCHING: All sectors have experienced the detrimental effects of the Covid-19 pandemic and the property sector is no exception.

In these uncertain times, job security and financial circumstances have somewhat affected the demand for residential and commercial properties.

In an effort to ease the strain on the sector boost property sales, the government has introduced several initiatives and campaigns, including measures under the recently passed 2021 Budget.

While some may speculate that developers may resort to introducing discounts during these challenging times, others believe that the market is stable and that developers will be able to ride out the temporary downturn.

Nevertheless, most developers have sounded that more government assistance for the property sector will be much appreciated.

New Sarawak Tribune spoke to several property developers and associations to gain better insight into the current circumstances faced by the sector. 

Sim Kiang Chiok

Sarawak Housing and Real Estate Developers’ Association (Sheda) Kuching branch chairman Datuk Sim Kiang Chiok said that residential property prices were currently stable.

He said developers were not expected to offer massive discounts for existing properties because of the various forms of assistance provided by the government to stimulate the property market.

He pointed out that the economy was still very much hindered by the Covid-19 pandemic as borders were still closed, adding that demand for goods was also reduced and business productivity was still slow.

“The start-stop or slowed movement of our working population will affect business cash flow and turnover,” he said.

Sim said that with the third wave of Covid-19 infections, the economy would need more than what was provided for in the new 2021 Budget.

He agreed with calls that the bank moratorium should be for all loans for another six months until June next year.

“Now, with the targeted moratorium, all loans are to be repaid but with lowered amount. However, with the third wave of infections, many businesses are expected to be affected.

“The blanket loan moratorium is like letting borrowers recapitalise without having to get new loans with the very strict lending conditions,” said Sim. 

He also said that the wage subsidies lasting three months from January to March next year as per the 2021 Budget were very narrow as they provided only for tourism and retail industries. He said it should be for all businesses affected by the pandemic.

He said all these aforementioned measures in addition to the Home Ownership Campaign (HOC) announced in June this year had helped to revitalise the property market to a certain extent, but not up to the pre Covid-19 level.

“Now with the third wave, it is foreseeable that sales will be affected again. The targeted and less wage subsidies as proposed in the new 2021 Budget will affect job security and the bank will have higher risk assessment when they lend out,” he said.

While the general selling prices of residential properties were stable, he noted that these excluded developments under the HOC programme where there was a mandatory discount of at least ten percent of the developers’ approved prices.

Nevertheless, moving forward with the third and subsequent Covid-19 infection waves, Sim emphasised that much help from the banks and government was needed to ride out the poor demand and low productivity business environment.

Noting that several vaccines were being actively tested and that the government was working to gain access to vaccines as early as the first or second quarter of next year, he said the old normal might be seen by the end of next year.

“With that, the world economy and Malaysia’s economy will be restored, regained, and grow by 2022. Housing is a basic need and we can foresee that house prices are going to be stable with some discounts until the old normal is restored,” he said.

Tay Chiok Kee, Hock Seng Lee (HSL) property development general manager, described the current situation facing developers as challenging but not dire.

“At the height of Covid-19, the buyers’ market took a cautious wait-and-see approach. We believe sales are picking up because prices of new launches have stayed quite stagnant for a number of years.

“Affordability has been a key issue for most Sarawakians for a number of years. Developers will not launch new products that are unfeasible to sell,” he said.

Tay said in the third quarter of this year, HSL property sales experienced a drop of approximately 50 percent, but momentum had picked up in the fourth quarter.

He added next year, HSL would launch a diversified range of products across a broader price range in the residential category.

“For commercial, we will continue to expand the Vista Industrial Park, and stick to a lease-only model for La Promenade Mall for better tenancy mix,” he said.

He said that for selected properties, HSL had participated in the government’s HOC programme, offering a discount of ten percent.

On government initiatives for the property sector including those under the 2021 Budget, Tay observed that other than incentives on housing below RM500,000 per unit, there were no significant initiatives to improve home ownership.

He said it was worth noting that the housing industry was highly complex, with costs and selling prices largely determined by planning guidelines.

“To address unaffordability and mismatch, the public and private sector need to collectively address cost concerns from the planning stage.

“There is also a great need to reduce time-cost. Addressing these issues can have a bigger impact than just trying to improve end-financing matters,” he stressed.

On the RM1.2 billion allocated under the 2021 Budget for the construction of comfortable and quality housing for the low-income group, Tay said the private sector always welcomed the government’s efforts to fund more public housing for the low-income group.

“This benefits the low-income group immediately as such projects are usually large scale. More public housing will also directly help to rebalance the private sector’s medium cost houses,” he said.

To cushion the impact of the Covid-19 pandemic on the property sector, Tay said short-term measures included much more cross-platform advertising, from roadside buntings to newspapers and social media.

As an example, he said HSL launched a new showhouse in in La Promenade’s Precinct Luxe in October to generate public interest, and actively utilised social media platforms to promote video tours and virtual walkthroughs.

“However, in the medium to longer term, planning more affordable units is the best solution. Reducing lead time will help greatly as more affordable units should quickly be built and put on the market.

“This will be a win-win situation as developers will have cash flow and the public will benefit from reduced mismatch,” said Tay.

Lily Lim.

Datuk Lily Lim, founder and chief executive officer of RJ Group of Companies, said that property developers would appreciate government measures to further reduce fees and taxes which were fixed costs to developers.

She said the government’s sentiments towards stimulating the market had been very favourable towards most home buyers.

“With strong support from the government and the banking sector, it will be a great roadmap for RJ Group of Companies,” she told New Sarawak Tribune.

Lim said that Sarawak had seen a lot of stimuli, expressing confidence that under the stewardship of Chief Minister Datuk Patinggi Abang Johari Tun Openg, the state would prosper due to his exemplary focus on the people.

“As part of the measures, we are proud to say that at RJ Group of Companies, we will be supporting the government schemes for affordable housing,” she said.

She also emphasised that great design and quality would withstand the test of time and economic cycles, adding that RJ Group believed highly in the quality of homes they delivered.

“We are very involved in every step and every detail — from the conceptual and planning stage, down to the selection of time-tested brands that we use, like MML tiles or Kohler fixtures,” said Lim.

However, she pointed out there was no guarantee that what the market had to offer now would be available again in the future.

“In most countries, we can see that homes are generally smaller whereas we are still able to enjoy the generous square footages in Kuching,” she said.

Brandon Chew Wui Pin.

IQI real estate negotiator Brandon Chew felt the situation facing developers was not that acute in Kuching. He shared that IQI was still receiving many appointments for residential property purchases.

“One reason is that conventional investors have decided to switch from holding cash to holding properties due to the low fixed deposit interest rates and low housing loan rates which are actually a big bonus for residential purchasers — regardless of whether it is for own stay or investment,” he said.

He revealed that for residential properties, most developers were already offering HOC incentives with a ten percent discount and stamp duty waiver — a big gain for home buyers.

“Developers may suffer for a while but with this HOC programme extended for five years, it will not be so bad as people will be motivated to buy houses more than ever,” he said.

As for commercial properties, he said there was a temporary dip caused by the Covid-19 pandemic and the movement control order (MCO), which had hampered businesses.

Chew said that as a result of the pandemic, most people had switched to online shopping and even online food ordering. This, he explained, resulted in lower demand for physical retail shops.

He said the government’s incentives including those under the 2021 Budget would significantly   boost the property market.

“The waiver of Real Property Gains Tax (RPGT) for properties disposed up until Dec 31 next year, extended HOC, and extension of stamp duty really encouraged people to buy more properties.

“Even if you are buying a newly constructed project, this is the best time,” he said, pointing out that the entry cost to own a house was now very low.

Chew was of the view that the property sector might start to bounce back by the second quarter of next year.

Another local real estate negotiator, who wished to remain anonymous, said the property market was greatly affected, with rental and sales of higher-value houses remaining stagnant.

However, demand was still fair for lower priced residential properties at RM400,000 and below, but it was difficult for housing loans to be passed.

“Rental value has dropped by about 25 to 30 percent and it is still difficult to find long-term tenants,” she said.

As physical showhouse visiting and activities were hindered by the pandemic, she said marketing greatly suffered because sales personnel who were not accustomed to online sales.  

On government’s initiatives to spur the property sector, she said the exemption of stamp duties and property gains tax along with other incentives certainly helped to encourage eligible buyers to confirm their decisions within this period.

“To further cushion the impact of the Covid-19 pandemic, stamp duty exemptions should cover not only the primary market but the secondary market as well,” she added.

She also suggested incentives or tax reliefs be given to developers to create more affordable houses of RM400,000 and below.