The Malaysian residential market needs to be evaluated with a more realistic approach to curb the rising overhang that’s being caused by the current demand-supply mismatch in the market.

Property consultancy firm Nawawi Tie Leung (NTL), in a report yesterday, noted that the residential property market across Malaysia has been undergoing trying times, adding however that increasing interest from first-time home buyers has “swayed” the residential market towards affordable housing.

“In addition to the other affordable housing initiatives such as affordable housing schemes, funding schemes, House Ownership Campaign (HOC), the government with the Securities Commission released its new property crowdfunding framework recently. Growing confidence has been shown in these initiatives in the last few quarters,” it said.

Additionally, NTL said the high-end residential market sampled in Kuala Lumpur continues to remain soft due to subdued activity.

“According to the National Property Information Centre’s data, house prices continued to rise throughout 2018 with an increase of 3.1% in the house price index against 2017.”

Meanwhile, Maybank Investment Bank Research (Maybank IB) in a report said the demand-supply rebalancing in the property sector will take some time, but added that home sales might have hit bottom already and should stabilise in 2019.

It said the current rock-bottom valuations of property stocks have priced in the negatives.

“Hence, we are maintaining our neutral stance on the property sector. The sector still lacks a strong re-rating catalyst.

“That said, we may see some trading opportunities around the sector rotation theme / better market sentiment [revival of major infrastructure project such as KL-Singapore High Speed Rail (HSR)] but it could be short-lived if weak sector fundamentals persist, we think.”

Maybank IB said its top pick is Sime Darby Property, as the company has an advantage over many developers.

“As a land seller, it can monetise its landbank for additional income and use the proceeds to self-fund its property developments or reward shareholders.

“Its relatively stronger balance sheet (0.26 times net gearing in end March 2019) would help it to sail through the prolonged slowdown in the property market if there is any.”

“Glomac is more of a turnaround story after facing the drag from poorly occupied Glo Damansara Mall over the last two years.

“We expect Glomac to report significant year-on-year earnings growth in the fourth quarter of 2020 on lower operating cost from Glo Damansara Mall after the mall secures two anchor tenants – LESSOHOME and Jaya Grocer. Occupancy rate will improve to 74% (from 45%). Glomac’s net gearing stood at 0.31 times at end-Apr 2019, which is manageable.

“As for UEM Sunrise, we have recently upgraded it to buy after the share price fell 18% since its April peak and it now presents an upside potential of 19%,” it said.