Headwinds expected, but new government policies expected to drive incoming investments to revitalise property market – Knight Frank

• According to Knight Frank's latest report, the Asia-Pacific region is set to remain the world's fastest-growing region, despite ongoing stressors exacerbated by the Russia-Ukraine conflict and global financial volatility.

PETALING JAYA (Dec 19): The new unity government is expected to outline clear and consistent policies to strengthen the Malaysian market, which will be impacted because of global macroeconomic headwinds.

According to Knight Frank Malaysia (KFM) group managing director Sarkunan Subramaniam, Malaysia needs to bring back investors’ trust and faith in order to see recovery across all sectors.

“The global macroeconomic headwinds will impact upon Malaysian markets. However, we are still hopeful that the newly-elected unity government will be able to outline clear and consistent policies in driving economic investments into our country, and encourage all direct measures to revitalise and sustain the growth of the property sector,” he said.

KFM deputy managing director Keith Ooi said, in driving the property sector forward, the key initiative should be introducing “green incentives”.

“We hope the government will introduce ‘green incentives’ to property buyers, landlords and developers who are aligned with the nation’s target of becoming a ‘net zero’ nation by 2050,” he said.

Ooi said KFM encourages an extension of existing incentives to incorporate tax reliefs/grants to industry players who include green features into their developments, especially those who have contributed in the renewable energy like solar panels and water harvesting, as well as sustainably-built properties from timber and low-carbon cement in place of high-emission materials.

“It’d be wonderful to see these incentives being extended to property buyers who purchase green homes with green features – thereby addressing the high capital outlay that is required in order to ensure a sustainable future,” he said.

Asia Pacific market to remain as bright spot amid shadows

On the Asia Pacific market, the region is expected to weather the challenges from the global economic downturn through 2023.

Knight Frank Asia-Pacific’s managing director Kevin Coppel said while the Asia-Pacific economy will faces significant headwinds in 2023, it will remain a bright spot amid the shadows cast by the slowing global economy.

“Economies in the region will once again dominate growth worldwide, which will have implications for its real estate markets. That underlying growth will continue to underpin its attraction to occupiers, while its economic diversity offers ample opportunities for investors to target a range of asset classes to position their portfolios for the post-pandemic landscape,” he said.

According to Knight Frank's latest report, Asia-Pacific Outlook Report 2023: Pivoting Towards Opportunities, the Asia-Pacific region is set to remain the world's fastest-growing region, despite ongoing stressors exacerbated by the Russia-Ukraine conflict and global financial volatility.

The report indicated that even as growth momentum continues to normalise across much of the region, domestic-oriented economies such as emerging Southeast Asia and India are forecast to remain supportive of overall regional growth in the upcoming year.

Office market to favour tenants

At a sector level, the report predicts that the market conditions in 2023 will continue to favour tenants as highly-amenitised office buildings with sustainable credits are being completed and ready for occupancy.

However, growth in office rent will moderate from 3% to 2% as occupiers add flexibility to their portfolios to generate savings. Meanwhile, vacancies are forecast to rise from the current 14.6% to 16% as corporates turn more cautious with expansion.

On the other hand, many occupiers are anticipated to move swiftly to an office at first stance – emboldened by increased rates of return to the office driven by job insecurity.

In the logistics sector, rents are forecast to increase by 5.5%, the report stated. 

Overall, real estate offers good diversification benefits with a relatively low correlation to equities and bonds. Therefore, risk-adjusted returns for direct real estate are unlikely to re-price to the same extent as indirect.