Another challenging year for property market

KUALA LUMPUR: Malaysia’s property sector will be facing another challenging year, amid slower economic momentum. 

In a report by Maybank IB Research on Thursday, the research house expects overall property sales to stay weak due to slower economic momentum, cautious bank lending practices and the incoming supply of new properties.

As a result, property development margins are likely to stay subdued, in anticipation of more discounts/rebates/marketing incentives to lock in the prospective buyers. 

“Rising competition will also limit developers’ pricing power. Property stocks under our coverage
currently trade at 36-62% discount to RNAVs compared to 50-70% discount during the global financial crisis,” it said. 

The latest banking and NAPIC statistics point to ongoing weakness in property demand. According to NAPIC, 9M15 property transaction value declined 4% QoQ, with the larger decline being recorded for properties priced below RM500,000. 

Maybank said according to discussions with bankers and industry players, there has been an increase in the number of properties put up for auction, while banks had reported of several
isolated cases of small, unlisted property developers defaulting over the past year.

Meanwhile, supply will continue to outstrip demand in the near term especially when the units (particularly high-rise) launched under the 5/95 housing loan scheme between 2012-2013 come on stream, it added. 

Meanwhile, the government’s various housing schemes point to the potential influx of affordable housing, which will pose competition to existing players. 

The research house reiterates its Negative call on the sector.