Published by NST Property, April 22, 2020
The turbulence in the economy because of the Covid-19 pandemic and the unprecedented Movement Control Order (MCO) will hurt the local property market but to say property prices will drop by any fixed percentage is absurd.
"Yes, all these situations have caused uncertainty. But for certain groups of people who have concluded that the property market will fall by 10 per cent, 20 per cent or 30 per cent post-MCO is an overstatement. They must have a crystal ball. You can have all the data and make a guess, but you cannot predict by how much house prices will fall or when the market will recover," said Siva Shanker, chief executive officer, real estate agency Rahim & Co International.
Black swan theory
Shanker, a senior real estate expert and past president of Malaysian Institute of Estate Agents (MIEA), used the black swan metaphor to describe the current situation.
A black swan is an unpredictable event that is beyond what is normally expected of a situation and has potentially severe consequences. Black swan events are characterised by their extreme rarity and their severe impact.
"There is a confluence of three black swans and a situation we have never been in before. There is a global economic crisis, political uncertainty, and this virus situation. We have had viruses before but Covid-19 may be a bit more serious than others. I think it can be beaten but it will take time. Once this is beaten, the market will get through but no one can give an analysis on how the property market can perform in the next six months," he told NST Property.
Shanker said all the fundamentals were in place and the market was ready for an upswing.
"But then, the virus came. During the lockdown period, everything grinds to a standstill. Everybody is staying at home. Everyone is scared. Who wants to look at properties now?
"I think the market is going to go down. There is no question about it. The economy is expected to go down and the property market is not far behind. It will go into negative territory this year," he said.
Shanker said in the next one to two months, when people go back to work, some order may return.
He anticipates that the market will start moving again.
"There will always be somebody who needs to rent, buy or sell. We will need three to six months from now before there is some clarity in the market. By then, there will be more data available and we can see how the market is behaving, and then make a more meaningful assessment of the situation. With that, we may be able to predict more definitive numbers and percentages.
"So for those people to say definitively 10 per cent, 20 per cent or 30 per cent is pure guesswork. If you're a qualified property professional, you can perhaps make some estimates because of your experience and market knowledge, but there is no way anyone can be definitive about market behavior, especially in a situation like this.
"No matter how bad times are, transactions will never go to zero. There will be some transactions and gradually the market will recover. There will be pent up demand. When the virus situation is over, we can expect that 2021 will be a better year," he said.
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