Will Malaysia’s land prices crash post-pandemic?

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There is little development land left in the Kuala Lumpur city centre.

Uncertainty over the recovery of the economy after the Covid-19 pandemic continues to weigh on the property market, leading to questions over the short- to medium-term prospects.

If economic conditions show little improvement in the coming months, will land prices drop, recover or maintain post-pandemic?

Juwai IQI chief economist Shan Saeed told Property Advisor, considering that the value of property reflects future demand, land prices in Malaysia are not likely to experience a bubble and will remain stable for the time being.

“The property market is not going to crash because land prices are not crashing. There is no property bubble for now. A bubble only happens when land prices crash.

“Is it possible to find a three-acre parcel near Kuala Lumpur City Centre [KLCC]? Currently, all the land is occupied. Does that seem like an indication land prices are going down or crashing? I don’t think so,” he said.

According to Shan, Sofitel Kuala Lumpur, which is located next to Wisma Central in Jalan Ampang, was sold for RM3,200 per sq ft earlier. Now, there are plans to sell it at RM4,500 psf and he has been told there’s still interest in it.

He believes that one of the signs of a property market crash is when land prices start to drop tremendously.

“Let’s say that today land prices are at RM100 and a year later drop to RM98. That is a sign … investors are not very confident. But since Malaysia is a vital part of China’s Belt and Road initiative, I do not believe land prices here will crash.”

The Belt and Road initiative is an ambitious plan to connect more than 70 countries in Asia, Europe and Africa to China via a series of rail, road and sea links, forming a new Silk Road. The goal is to promote regional connections and economic integration, thereby expanding China’s economic and political influence.

Shan added that he believes land prices in certain areas will fall by 2% to 6% but demand will remain robust.

However, president of the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS), Michael Kong said land prices would increase post-pandemic as during the Covid-19 period, development had slowed down tremendously.

“Post-pandemic, meaning after the dust has settled and things are back to normal. Land prices will spike. Developers are wary of starting new construction. Unless their land bank has depleted, they will not purchase any new land due to the uncertainty ahead and the hefty holding cost,” he said.

Thus, there is less demand for development land and, logically, prices would drop, Kong said, adding that property development is a significant contributor to the economy as it involves a long chain of supply and services.

“A lull in growth would cause temporary stress in the economy as many suppliers, contractors and service providers would be affected.

“In the long run, good government policies must work hand in hand with the property industry. We are where we are today, in this chaos and mess, due to a mismatch of policies and oversight in strategic planning aggravated by the pandemic.”

In better times, Kong said, land prices in the Kuala Lumpur city centre ranged from RM3,500 to RM4,000 psf. But currently, he reckons that it will drop by more than 15%.

Do property players need to adopt AI?

Juwai’s Shan said to stay relevant in the property industry, players need to learn to use artificial intelligence (AI).

“So far, what the government has done is good as it has adopted AI and the focus is on 5G and energy efficient vehicles. The government is committed to promote and focus on technology and that’s where the future lies.

“So, in the next five to 10 years, only the economies with tech-savvy people will progress. In Malaysia, 95% of our citizens have smartphones and 60% of the population is tech savvy.”

This article was written by Sharina Ahmad of PropertyAdvisor.my, Malaysia’s most comprehensive source of property data, property analytics and insights.