Article prepared by Dr. Muhammad Najib b. Mohamed Razali
The recurrence of several outbreaks such as H1N1, Severe Acute Respiratory System (SARS), Middle East Respiratory Syndrome Coronavirus (MERS-COV), and Coronavirus (COVID-19), has a significant impact on global economic growth.
These pandemics can create recession at the global level, which has an effect on humanity. This is due to the unpredictable situation which depends on a country’s measure to overcome the situation. Several measures such as quarantine, travel restrictions, businesses temporary closing, stimulus packages, and increases in budgets for healthcare will have an impact on the social, economic, finance, and governance aspects of a population.
Given the scale of the pandemic or epidemic, the impact will be significant which will create vulnerability within an economy. The real estate sector in Malaysia will also be impacted by the COVID-19 pandemic, especially within the retail area.
Nevertheless, from an analysis using Exponential Generalised Autoregressive Conditional Heteroscedasticity (EGARCH) (see diagram), the property security market in Malaysia will be able to avoid a sudden crash. The analysis recognises the movement of the unpredictability investments of Pan-Asian listed property companies.
Indeterminate events that contribute to internal factors are political instability, domestic economic conditions, natural disasters, macroeconomics, speculation, and external factors such as financial crisis, regional natural disasters, trade agreements, changes of social-economic conditions, geopolitical, and outbreaks.
From the diagram, it can be concluded that over the past 15 years Malaysia has great influence with other countries in terms of property portfolio investments. This is due to strong domestic investment activities which absorb a minimum impact of globalisation effects on the country.
It is anticipated that due to the pandemic, other economy powerhouse countries such as United States, China, and countries within Europe will experience contractions in economic growth. Thus, as a free trade country, Malaysia will also be impacted by negative growth.
However, the analysis suggests that Malaysia has shown high spill-over with other pan-Asian property portfolio investment markets over the past decade. This indicates that Malaysia does not heavily rely on foreign countries to stimulate economic growth.
Bank Negara Malaysia (Central Bank) also suggests that Malaysia can withstand extreme shocks due to strong capital buffers. Malaysia is still able to offer a competitive advantage within the global investment context. Other factors such as a stable geo-political situation together with moderate to high transparency, the real estate index level can attract more investors to invest in the property securities market in Malaysia.