CHALLENGING MARKET

THE property sector remains tough due to weak sentiment, low affordability, stricter bank lending and rise in incoming supply, says PublicInvest Research. However, it believes prices will still hold up well.

SHARE prices of most developers may have moved up this year, but the property market remains tough, say analysts. This is due to weak sentiment, low affordability, stricter bank lending and rising supply.

The sector is also faced with high property prices and household debt, as well as oversupply in certain segments, such as high-end condominiums.

The likes of Public Investment Bank Bhd (PublicInvest), however, believe property prices will still hold up well.

Its analyst Tan Siang Hing said this would be supported by ample liquidity, high input costs due to compliance and land costs, a low interest rate environment and strong secular positives — young demographics and improved connectivity resulted from spending on mass rapid transit, light rapid transit and high-speed rail.

“With the overall property transactions falling for the second year in a row (-12.6 per cent year-on-year last year and -7.7 per cent in 2015), sales are unlikely to see recovery in the near term as bank lending is still relatively strict,” Tan wrote in a report yesterday.

He said the gains made by property stocks were due to renewed buying interest in laggards and overall improved appetite for risks, rather than signs of recovery in operating conditions.

“We are still of the view that the property market will remain challenging in 2017 due to the current difficult trading environment,” he added.

Hua Yang Bhd chief executive officer Ho Wen Yan agreed that the property sector landscape continued to be challenging.

Nevertheless, he said affordable housing remained at the forefront of public discourse as demand continued to outstrip supply.

Hua Yang aims to bolster supply in the affordable segment to meet market needs.

“Affordability to Hua Yang is offering houses that are pricesensitive in strategic locations and without comprising quality,” he added.

The company’s focus this year will be on driving new sales to improve earnings visibility.

“We have plans to roll out new launches with an estimated total gross development value of RM322 million in the financial year ending 2018.

“This is in addition to the RM718 million new projects that were launched late in the financial year 2017 (ended March 31), giving us more than RM1 billion of new projects across our key regions,” Ho said in a statement.

Meanwhile PublicInvest said despite persistent soft market, Bursa Malaysia’s property index had performed well so far.

It has gained 14 per cent, outperforming the key FTSE Bursa Malaysia KLCI by seven percentage points.

“The sector is now trading at 0.8 time price-book value, or at its long-term sector average,” Tan said.

PublicInvest’s picks for the sector are SP Setia Bhd, UEM Sunrise and LBS Bina Group Bhd, which have healthy unbilled sales, exposure in growth areas and well-located landbank.

As for UEM Sunrise, Tan said the trading environment in Johor was still tough but PublicInvest believed the company would be able to regain its sales momentum, given its prime landbank in the Klang Valley and Iskandar Malaysia.

“LBS is preferred for its strong exposure to the mid-market segment,” he added.