PROPERTY sales have plunged more than 50% in recent weeks, with fears of further losses due to the movement-control order (MCO) and a larger economic impact from the Covid-19 pandemic, said real estate agents.

They told The Malaysian Insight that they had anticipated a good year ahead following increased sales in December and January, but this run came to an end with the virus outbreak.

Adding to their misery is the MCO, which has resulted in property agents and law firms not operating. The restriction order to curb the spread of the coronavirus came into effect on March 18, and has been extended to April 28.

Because of this, transactions in the final stages are put on hold, said property players.

“Property sales require a lot of human contact. Property inspections, touring the surrounding areas, handing over the keys, moving, even signing the S&P (sales and purchase) agreement, all these require close contact,” said Malaysian Institute of Estate Agents president Lim Boon Ping.

“We can’t do any of that now. Of course it is affecting our income. We can only receive commission after the agreements are signed,” he said, adding that being unable to close deals is causing agents the most problems.

He said property sales have declined at least 50% due to the MCO.

Agents are still working hard, hoping to secure sales from old clients or following up on others, he said.

“We were surprised that some agents could still make sales during this time. These cases are usually clients who had inspected the property before the MCO, so they can agree now.”

However, Lim stressed that the government directive is preventing agents from closing deals, which means they do not have income at the moment.

Fading optimism

Industry players are expecting the economic impact of the pandemic to cause a deep global recession.

They foresee trade in the property sector falling about 30%, similar to how the industry performed after the 1997 Asian financial crisis.

Trade in the sector peaked in 2013 and gradually fell in the subsequent years, but experienced growth in 2018, giving hope to industry players, only for it to be dashed by Covid-19.

Esprit Estate Agents managing director Aldrin Tan said after the wave of post-MCO deals, property sales will likely slow as most people will adopt a wait-and-see stance due to the recession.

He said there is good demand for properties in Malaysia, but this does not necessarily translate into sales.

For agents, he said, it is a matter of how long and how badly their income is disrupted.

Tan, who has been in the sector for 25 years, said industry players were optimistic due to the rise in sales in December and January.

“Sales grew about 0.6% in 2018, so the industry was hopeful. The complete data for 2019 is not yet out, but the first half of last year was better than the same period in 2018, so it looks like 2019 was better than the year before.

“Because of the growth, most of us were more confident about the sector compared to the three or four years previously.”

With the MCO in its fourth week and Covid-19 still ravaging other parts of the world, Tan said any optimism left in the sector has quickly evaporated.

He said the global economy has taken a heavy hit, but the situation now is unlike the Asian financial crisis in 1997 and the 2008 subprime mortgage crisis, both of which affected only certain sectors.

Worst economic crisis

The coronavirus pandemic has caused many countries to enter recession, and Tan said this may be the worst economic crisis of the last 100 years.

“Most people are not optimistic, unemployment is expected to increase, domestic manufacturing will decrease, and global consumption and spending will fall as well.

“Even though the ringgit’s value is going down, it’s not helping our exports.”

He said the number of property agents who leave the industry will be determined by how long their income disruption lasts.

Following the 1997 crisis, he said, it took the Malaysian property sector two years to recover, adding that the situation was similar after the 2008 crisis.

A lot depends on how fast the property sector can bounce back after the pandemic, he said.

“In the previous four years of slowdown in the sector, everyone was working hard and hanging in there, but how long and how bad is it going to be this time? If this goes on any longer, I’m afraid many will choose to cease operations.”

He said the economic indicators now are similar to those of the 1997 crisis, and sales are expected to fall.

It would come as no surprise if the drop exceeds the projected 30%, he added.

After Malaysia’s property sector peaked in 2013, said Tan, the reduction in sales was estimated at 20%, but across a four-year period.

“That was a soft landing, but will it be a long- or short-term fall this time? If it goes down 30% in the short term, we may be looking at a crash of the property market. But if it is spread over a few years, it’ll be cushioned.”

So far, Malaysia has recorded 4,530 Covid-19 cases with 73 deaths. – April 12, 2020.