Government’s affordable housing a focus in 2017

KUCHING: The government’s affordable housing or 1Malaysia People’s Housing programme (PR1MA) housing scheme is projected by analysts to be the focus in 2017, in anticipation of the upcoming general election.

According to RHB Research Institute Sdn Bhd (RHB Research), the government’s emphasis on affordable housing is serious, as this is the only key subject on the property market that was mentioned in Budget 2017, with no other material incentives or cooling measures announced (apart from the higher stamp duty rate for properties priced above RM1 million, effective from January 1, 2018).

The research house noted that this time around, in addition to PR1MA, the government specifically targeted government-linked companies (GLCs) for affordable housing developments on the lands that it provides.

“Apart from the supply side, the government has also assisted the end-financing scheme so that access to credit financing is available to the lower-income group, which typically experiences difficulties in obtaining loans,” the research house said.

RHB Research doubted that developers that undertake the affordable housing developments would benefit much, since profit margins from developing lower- valued housing products are typically not as attractive as that of normal property developments.

However, for the affordable housing theme, the research house believed the construction players and contractors would be the prime beneficiaries, given the rising job flow. RHB Research opined that one of the stocks with meaningful exposure to government affordable housing is O&C Resources Bhd (O&C).

“The company has bagged a few housing jobs from the government over the last few months,” it said.

Other than this small-cap company, the research house thought Malaysian Resources Corporation Bhd (MRCB) could also be a candidate.

It noted that the company currently has a PR1MA project in Kajang, and being also a contractor, is well-positioned to take on more affordable housing construction works.

On another note, CIMB Research projected that while the property sector would likely remain lacklustre, the potential influx of buyers from Mainland China could have a potential positive spillover effect on the property market.

The research house pointed out that over the last two to three years, more and more Chinese companies have entered the construction, property, power and infrastructure sectors in Malaysia.

“We believe it is a matter of time before the Chinese become key buyers in our property market. The prolonged weakness in ringgit could potentially be a pull factor as well.

“Of course, if that happens, the initial impact may not be positive to the local developers, as Chinese buyers would likely purchase properties from Chinese developers which already have a presence in Malaysia,” the research house said.

CIMB Research highlighted that local developers may continue to suffer until Chinese buyers become more aware of the local property brands.

“However, overall property transaction volume and prices for the country may be supported as a result,” it added.