Moderate growth forecast for sector

RHB Research analyst Loong says the Malaysian property market is recovering, although it is not a “strong V-shaped recovery”.

PETALING JAYA: The good old days of the property market, when banks were eager to lend and buyers snapped up properties within minutes after launch, are unlikely to return – especially not in the next few years.

“The euphoria of the 2011 market upcycle is long gone. Yes, the sentiment has improved in recent times, but we have to settle for modest growth in the future,” an analyst told StarBiz.Admittedly, property sales have increased in the last one year amid increased launches, but some of the major developers are still struggling to achieve their pre-pandemic sales.

A number of headwinds have continued to limit the sector’s growth potential.

This includes flattish property loan applications in the first six months of 2023, the increase in borrowing costs and the concerns on the economic conditions.

RHB Research analyst Loong Kok Wen said the Malaysian property market is recovering, although it is not a “strong V-shaped recovery”.

“Property sales this year are expected to grow by 5% to 10%.

“In certain areas such as the Klang Valley and Penang, the growth will be at a low, single-digit. However, I am bullish on the Johor property market,” according to her.

Loong noted that the Johor property market will benefit from the proposed mixed development next to the Johor Baru-Singapore Rapid Transit System (RTS) route and the government’s additional incentives to promote Iskandar Malaysia.

Late last month, MRT Corp and Hong Kong-based MTR Corp Ltd signed a memorandum of understanding for a mixed development next to the RTS link.

Loong expects the residential units in this mixed development to set a new pricing benchmark upon launch, given that other residential projects in the vicinity are already selling at RM1,000 to RM1,300 per sq ft.

“This may potentially help to lift property prices in the Johor Baru city centre in the future,” she said.

In a note yesterday, MIDF Research analyst Jessica Low Jze Tieng said the improving Johor property scene will benefit developers with exposure to the state.

Among the beneficiaries are Sunway Bhd with 1,632 acres of land in Johor, Eco World Development Group Bhd with 1,000 acres of land in Johor and Mah Sing Group Bhd with 1,120 acres of land in Meridin East.

Similarly, property developers that have township projects in Johor are also expected to benefit from a better property outlook in the state. This includes IOI Properties Group Bhd with its Bandar Putra Kulai township, Glomac Bhd with Sri Saujana and Saujana Jaya townships and S P Setia with Setia Tropika, Setia Eco Gardens and few more townships in Johor.

“In view of the improving outlook for the property developers, we are narrowing our revalued net asset value discount and target prices for property companies under our coverage,” Low said.

Commenting on the national property scene, RHB Research’s Loong opined that the easing property overhang has provided support for the market.

“However, at the same time, the inflationary pressure experienced currently may impact the demand for properties.

“During the 2011 market upcycle, we did not see such inflationary pressures,” she said.

Property market pundit Datuk Siders Sittampalam highlighted that property sales in the second quarter of 2023 (2Q23) were lower on a year-on-year basis.

Based on his observations, sales have softened further in 3Q23 compared to the preceding quarter.

“However, I must say that the 3Q23 sales appear to be better than expected,” he told StarBiz.Siders , who is the managing director of PPC International Sdn Bhd, said that residential buyers are “cautiously optimistic”.

“With the overnight policy rate (OPR) at 3%, it is still good for market demand.

“However, if Bank Negara raises the rate one more round, it would affect property purchases,” he added.

Siders pointed out that the volume of properties placed in the secondary market for sale has increased, indicating that more owners are thinking to monetise their assets.

“I was also told by some bankers that the non-performing loans are on the rise, although there is nothing to fear yet,” he said.

Despite the softer property sales in recent quarters, Siders said that property developers have been expanding their landbanks.

“This shows some level of optimism among the developers on the long-term outlook of the property market,” he added.

MIDF Research’s Low believes that the demand for properties should recover gradually in the coming months as Bank Negara paused the OPR hike in July.

This is despite the fact that the weaker loan application in June 2023 is slight negative to the sector, she added.

According to data released by Bank Negara, loan applications for purchase of property declined by 11% month-on-month (m-o-m) in June after strong growth of 23% m-o-m in May 2023.

The decline in June’s loan applications could be due to a normalisation in loan applications as the data in May 2023 was likely boosted by pent-up demand post-Hari Raya celebration.

In addition, the weaker figures in June could also be due to the impact of the OPR hike by 25 basis points in May 2023.

“The loan application in the first half of 2023 was flattish at 0.8%, indicating marginally better demand for property.

“Moving forward, loan applications are expected to grow stronger as Bank Negara paused the rate hike in July 2023,” said Low.

MIDF Research has maintained its “neutral” outlook with a “positive bias” on the property sector.