2018 good for retail industry but not for property sector

KUALA LUMPUR: The retail industry is looking forward to better 2018 but the the property market outlook for high-end and low-end properties does not look good this year due to excess supply and the economic and political concerns, according to analysts.

Affin Hwang Investment Bank Bhd analyst Loong Chee Wei told the Malaysian Reserve (TMR) that the property market was far from seeing any recovery due to the rising cost of living and the disconnect between income and affordability.

“Consumers are naturally more cautious on big ticket purchases such as houses. Any long-term asset purchase would depend on how the election pans out,” he said.

Syarikat Perumahan Negara Bhd director Abd Hamid Abu Bakar said returns from property sales were not as attractive as they were before.

“Sellers have to lower their expectations and not be too optimistic on high return of investments,” he said.

Consulting firm Khong and Jaafar Sdn Bhd managing director Elvin Fernandez said there was a slowdown in the residential sector and it was affecting the demand for properties priced below RM500,000.

On the commercial sector, Fernandez said the temporary stop order for the luxury segment would inevitably force project proponents (including developers) to heed market signals.

“Freezes are measures that cannot be effective if approvals have already been given out in substantial numbers. Traction from such a policy can only come about at a point of time in the future.

“There are also questions of exemptions that would dilute the effectiveness of the policy, which would lead to distortions in the market and creating far from desirable market efficiency levels,” he added.

Data from the National Property Information Centre show there were 130,690 unsold residential properties in the country during the first quarter of 2017 – the highest in a decade.

According to the report, of the total, 83% of the unsold units were within the above RM250,000 category and 61% of the total unsold units were high-rise properties, of which 89% were priced above RM250,000.

The TMR report said data from the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia showed the value of unsold and unutilised properties – both commercial and residential – stood at an estimated RM35.5 billion.

Meanwhile, the retail industry is looking forward to 2018 being a year for greater growth after a year when sale numbers grew marginally.

The Edge reported that the final number for 2017 showed retail sales growth is now expected to be 2.2%.

According to Retail Group Malaysia, retail sales are likely to grow by 6% in 2018, but it warned such forecast is also “highly dependent” on the general election, external economic demand and the performance of the ringgit.

A major operator of convenience stores in the country, MyNews Holdings Bhd is keeping a positive view for the retail industry, especially in the food and beverage (F&B) sector.

“When we talk about F&B, it is the most promising category in the retail line. It also shows in the statistics, with the F&B sector recording the highest growth,” MyNews chief executive officer Dang Tai Luk told the financial daily.

The company is also hoping to add 90 new outlets nationwide this year, as part of its expansion plans.

“There is still potential to grow. So yes, we believe the worst is over,” Dang was quoted as saying, adding that he expects the biggest challenge facing retailers would be the shortage of manpower.

“When you’re growing, you continuously recruit and you need to maintain workforce stability.

“However, be it high-end restaurants or supermarkets, the retail sector faces a high rate of employee turnover. Generally that’s the problem,” he said according to The Edge.

He added that local workers are not keen to join the retail sector and quit after a few months.

An analyst with RHB Research Institute is also very optimistic about the retail industry this year, saying it should continue where it left of in 2017.

“We expect the momentum to be sustained going into 2018 in anticipation of a pickup in consumer spending,” Soong told The Edge Financial Daily.

He cited a stable ringgit and higher tourist numbers as two key reasons for the optimism in the retail sector.

“We also think measures, such as GST relief and BR1M tabled in Budget 2018, would lend support to consumer spending and partially mitigate the impact of the rising costs of living. We do expect confidence to improve,” Soong was quoted as saying.

He added that domestic demand should continue improving as well.

“Private consumption is expected to be supported by employment gains and income, while public sector spending should be bolstered by higher revenue and expected election spending,” The Edge quoted him as saying.