No respite for properties in the near term — Analyst
KUALALUMPUR: AllianceDBS Research Sdn Bhd (AllianceDBS Research) believes the tightening measure by Dewan Bandaraya Kuala Lumpur to freeze approvals for four development types following the warning of oversupply by Bank Negara Malaysia (BNM) may do little to resolve the grave issue of supply glut in the near term.
Also, there was no clarity yet if the proposed moratorium on approvals will be implemented on a nationwide basis or only restricted to Kuala Lumpur.
The Malaysian property market has been on a downtrend over the past three years, driven by the persistently weak sentiment, low affordability and accelerating incoming supply.
“While new launches have been more subdued over the past few years, the take-up rate of 31.4 per cent in 2016 is also the lowest over the past 10 years,” the team outlined in a report yesterday.
“It is well anticipated that there will be more high-rise completions in the second half of 2017 (2H17) and also the 1H18 from the delivery of projects under the developer interest-bearing scheme (DIBS) that developers had capitalised on before it was banned effective January 2014.
“Therefore, it is not surprising that total number of unsold residential properties of 130,690 units (as at 1Q17) is the highest in a decade.”
AllianceDBS Research saw that market correction was in place since 2014, as both bankers and developers have been
While new launches have been more subdued over the past few years, the take-up rate of 31.4 per cent in 2016 is also the lowest over the past 10 years.
well aware of the property supply-demand imbalance when a slew of cooling measures were introduced.
“Therefore, developers have been scaling down their launches to incorporate far greater affordable housing in their pipeline to cater to the market demand. This is likely to be the norm going forward which will also see developers fighting for market share from home-occupiers,” it added.
This challenging property market outloko was not just confined to KL, it noted. The huge incoming supply – which is increasingly being converted into unsold inventories – will continue to pressure the property market.
“For residential properties (including serviced apartments), we believe Johor and Penang will be more vulnerable given incoming supply that is higher-than-national-average relative to the respective state’s existing stock,” the research firm highlighted.
“Meanwhile, the commercial markets in Klang Valley and Johor will be particularly more exposed to the high incoming supply.”
Taking cue from listed developers’ relatively flattish sales targets in 2017, we expect the trend to persist in 2018 as the impending general election, which is widely expected to take place in 1H18, will lead to potential buyers adopting a wait-and-see attitude for their property purchase decisions.
Also, developers’ new launches will face stiff competition from newly completed projects and public housing.
AllianceDBS Research