THE SUN DAILY. 30TH SEPTEMBER: Occupancy and rental rates of shopping complexes and office space continued to face downward pressure in the commercial real estate sector, according to Bank Negara Malaysia (BNM).
“Landlords continued to give rent-free periods, rental concessions, and short-term rental assistance packages to attract new tenants and retain existing ones. Despite various extensions of rental relief, up to half of mall operators reported significant difficulties collecting rent from their tenants. This will continue to adversely impact the cashflows of mall owners, particularly for malls in non-prime locations with relatively higher vacancy rates,“ it noted.
BNM forecasts vacancy rates could continue to rise and place further pressure on rents as a result of structural changes brought about by the pandemic, including flexible working arrangements and a shift in consumer spending patterns towards e-commerce.
It said the expiry of protections under the Covid-19 Act 2020 that prohibit non-paying commercial property tenants from being evicted from occupied premises could further weigh on occupancy rates.
Meanwhile, in H1’21, housing transactions were slower compared to H2’20 as the effects from the positive response to various home ownership incentives introduced by the government.
Properties priced below RM500,000 accounted for more than 80% of housing transactions. Housing transactions during the period also continued to be lifted by home purchases ahead of an earlier anticipated expiry of the Home Ownership Campaign in end-May 2021.
“Demand for financing has recovered to above pre-pandemic levels, with housing loan applications increasing across most price segments compared to H2’20. Approval rates have also broadly recovered closer to levels recorded before the pandemic. The overall approval rate in H1’21 increased 1.7% to 73.2% from 71.5% in 2020. While the average rate from 2013 to 2019 was 75.5%, except for properties priced above RM1 million where approval rates have continued to reflect the more cautious risk appetite of banks,“ it said.
The number of unsold houses rose to 181,460 units as at second quarter of 2021 from 167,104 units in the fourth quarter of 2020, largely driven by houses priced above RM300,000 and serviced apartments that are under construction. Several new housing launches in previous quarters which would have experienced slower sales during this period also contributed to the increase in unsold units.
“Market observers are expecting activity to pick up with the gradual easing of movement restrictions and recovery in economic activities as observed in H2’20. Incoming supply of newly-launched residential properties would likely shift towards the mass market price segments as seen in the higher share of properties priced at RM500,000 and below in H1’21 at 71.6% compared to the average share of 65.9% from 2015 to 2019.
“Such adjustments will continue to reduce demand-supply mismatches and improve overall housing affordability. Along with sustained demand among first-time house buyers, this is expected to mitigate risks of a significant house price correction.”
Based on the latest release of the National Property Information Centre report for H1’21, house price growth is likely to have remained broadly flat in the first six months of 2021 with the preliminary estimates of Malaysian House Price Index growth at -0.3% with market expectations of a recovery heading into 2022.
Meanwhile, risks to household balance sheets as well as potential losses to banks from housing loan exposures remained manageable.
“Risks from household investors in the housing market remained contained amid prevailing low interest rates. Such borrowers have higher incentives to default if house prices were to decline and fall into negative equity or they face a loss of rental income,” said BNM.
However, the annual growth rate of banks’ housing loan exposures to owner-occupiers continued to outpace that of exposures to household investors at 8.4% and 5.2%, respectively, compared to 8.7% and 5% in Dec 2020. Household investors are predominantly higher income earners who are typically more resilient to income shocks.
The average loan-to-value ratio of outstanding housing loans by household investors also remained relatively low and stable at 54.8% compared to 54.9% in Dec 2020, thus preserving ample buffers against a potential decline in house prices.