By applying the 18-year property cycle principle in the Malaysian context (Figure 1), the country’s property market is found to enter into the recovery phase in 2001, after the 1997 Asian financial crisis. The mid-cycle dip took place during 2007-2009, in conjunction with the subprime mortgage crisis. Since then, the country’s property market embarked on the explosive phase. Prices started to escalate significantly from 2010 to 2015, with an increase as high as 13.4% per annum. The recession phase, then, kicked in after 2015, marked by the mismatch of house prices and affordability, overhang in properties, cautious consumer sentiment, difficult access to property financing, as well as the weakened ringgit against other major currencies.

If the 18-year principle is followed, the recession phase is supposedly due in 2019; and the property market should then embrace a phase of recovery in 2020. However, in light of the current uncertainties in both the national and global economies, it is generally perceived that the property market would remain soft in 2020. As a consequence, the following recovery phase will only start in 2021. Assuming that the recovery will last for another 7 years, based on the 18-year principle as well as experiences from the previous property cycle, the next explosive phase would likely kickstart in 2028.

What are the short-term effects of COVID-19?
COVID-19 tends to worsen the market as people will temporarily move away from buying luxury and big-ticket items during tough times. Due to the lack of confidence about the near future, coupled with the uncertainty upon the duration of the business shutdown; potential buyers are likely to wait-and-see, leading to the reduction of average sales in the first half of 2020.

What are the long-term effects of COVID-19?
While the short-term effect is immediately reflected in the drop of sales; the long-term impact of the COVID-19 outbreak is more profound, as it will affect consumers’ lifestyle, leading to the transformation of how they work, shop, and live; thereby changing the associated real estate requirements. For example, office-based businesses are expected to downsize, due to the emergence of flexible and remote working culture incubated during the period of movement restriction.

The real estate market is expected to recover slowly within the next 7 years, keep good cash flow assets during this period, and avoid holding poor cash flow assets. For future investment, it must be noted that real estate is a medium-long-term investment, and inflation proof should be set as the first goal, and the second is liquidity. Making money from real estate investing is not far from you.

Property cycle may only appear twice in our life, grab the opportunity when you meet it.

Source: https://www.iproperty.com.my/news/current/covid-19-impact-malaysia-property-market