Disappointing property sales outlook for 2017
KUCHING: Looking ahead into 2017, MIDF Research, research arm of MIDF Amanah Investment Bank Bhd believed that sales within the property segment will be disappointing and flattish at best.
The rationale for this view is based on a slowing House Price Index ( HPI) growth, decline of property transactions, weaker consumer sentiment index, and marginal recovery of loan demand and approval rates in October.
In the second quarter of 2016 ( 2Q16), HPI grew by 5.3 per cent year over year (y- o-y) to 235.4, this was observed to be a significant slowdown in HPI growth when compared to the five year growth average of 9.3 per cent.
However, HPI growth differed from region to region, with Kuala Lumpur and Selangor topping the charts with 6.9 and 6.6 per cent growth y- o-y. As such, MIDF research believed that the outlook for property price to be better in the greater KL region which is further supported from the urbanisation factor.
In conjunction to lowering property prices, overall property transaction value also saw a decline in 3Q16 by 6.3 per cent quarter over quarter (q- o- q) and 17.9 per cent y- o-y. These figures were derived from a recent Property Market Report released by the National Property Information Centre ( NAPIC).
From the report, MIDF research noted that the lower transaction value was consistent with the fall in transaction volume of 8.5 per cent q- o- q, and as such believes that the demand outlook for potential property buyers to remain weak in 2017 as they are likely to remain price sensitive.
This weaker property demand outlook is reflected in marginal recovery in loan demand which is further pressure but marginal recovery in loan approval rates.
From data released by Bank Negara Malaysia ( BNM), October loan demand showed a recovery of 2.1 per cent month over month (mo-m) to RM25.2 billion, while the recovery is promising, looking at cumulative figures for the past 10 months in 2016, loan demand had actually declined four per cent yo-y to RM242.7 billion.
This marginal recovery in loan demand was further pressured by marginal recovery of 1.0 per cent in loan approvals to 43.7 per cent m-o-m, observed to be four per cent decrease from the loan approval rate of 47.7 per cent in October last year.
Following these discouraging figures, MIDF research predicted property sales to be flattish at best for the coming year and maintains their ‘neutral’ view on the sector.
However, for expected strong players within the property sector, the research arm picks UOA Development Bhd as their top performer within the segment, due to its projected 60 per cent minimum sales growth in FY16 to RM1.3 billion, its healthy balance sheet, and its high dividend yield of 6.4 per cent.
Additionally, the research arm expected positive sentiment following the inclusion of Uoadev into FTSE Bursa Malaysia Mid 70 Index as mid- cap fund managers may allocate more funds to invest in the company.