RHB Research: Sector May Recover in 2020
The property market may recover in 2020 or 2021 when a fresh cycle starts again with a new wave of demand, according to RHB Research Institute property analyst Loong Kok Wen.
She said the strengthening of the ringgit and recent rebound in crude oil prices may not be sufficient to restore confidence in the property sector.
Slower gross domestic product growth of 5.2 percent forecast for this year compared with 5.6 percent last year will also not help the sector, said Loong.
"With no prospects of near-term appreciation in property prices, potential investors are likely to stay out, while some genuine buyers may hold back on their purchases as they expect some correction in prices" she added.
Loong also expects the market to undergo a consolidation phase in the next two years but opines that projects in strategic locations would still be marketable at the right price points but the high-end segment would generally still struggle.
She said while price upside may be limited, transaction volumes may recover slightly this year. "As developers continue to offer attractive discounts and rebates, and roll out affordable housing projects, we believe there would be more transactions in the market. The average transaction value, however, may be lower due to the switch in product segments" she added.
On the hike of the Overnight Policy Rate (OPR) in January, an analyst from MIDF Amanah Investment Bank Bhd said there had been a knee-jerk reaction from consumers.
The analyst said the market is likely to be adversely impacted but it should be temporary.
Bank Negara Malaysia (BNM) increased the OPR by 25 points to 3.25 percent. It had maintained the OPR at three percent since July 2016.
Another analyst said the increase in OPR was in line with the monetary policy tightening by major global central banks and supported by stronger Malaysian economic growth last year.
"BNM has also indicated that it may consider reviewing the current degree of monetary accommodation, given the strength in global and domestic macroeconomic conditions" the analyst said.
Mah Sing Group Bhd group managing director Tan Sri Leong Hoy Kum is optimistic about the local property sector outlook in the first half of this year.
He believes that improvements in the country's economic conditions will spur the average household median income.
"Historically, the improvement of median income has led to an increase in transaction volume. Therefore, affordable homes with good connectivity especially transit-oriented development (TOD) and transit-adjacent development (TAD) will continue to be in demand as it is the healthiest sub-segment in the overall property market" said Leong.
He also believes that long-term demand will continue to be strong for property buyers who are buying to own or for long-term investment.
"The property industry is expected to be healthy in mid and near-term supported by the young demographic, growing population and a low unemployment rate. Property as an investment asset remains one of the safest forms of investment and a good hedge against inflation" he said.
Mah Sing is targeting RM1.8 billion sales this year, with 74 percent coming from residential units of below RM500,000.
The company is planning six new launches in the first half of this year.
Leong said Mah Sing will continue to be disciplined in financial management in order to ensure strong balance sheets and liquidity while launching new developments and actively pursuing sales from existing projects.
He is expecting RM587 million from final stage billings on the delivery of vacant possession which will further boost the company's liquidity.
Mah Sing has 859.96ha undeveloped land with remaining gross development value and unbilled sales of RM27.6 billion, which could support its earnings growth for the next eight years.
The company is also targeting to increase its land banking in the Klang Valley to 75 percent this year from 66 percent last year.
Leong said Mah Sing will continue to reinvent affordability by developing quality homes in strategic locations with prices that the rakyat can afford.
"We carefully plan for our launches to ensure that every project has its own appeal at an affordable price below RM500,000. For example, M Vertica in Cheras features over 40 luxurious facilities in its 4.5 acres (1.82ha) of facility deck, one of the largest in a residential development.
"Another project in Klang Valley, M Centura in Sentul, is a freehold residential address located only 5km to the KL City Centre. In Penang, M Vista@Southbay is strategically situated in the island with easy accessibility to town and mainland while offering an affordable price.
"Our 1,313-acre (531ha) Meridin East township offers lake garden homes with spacious layouts and living areas suitable for families in the heart of Iskandar Malaysia" added Leong.
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