Competion for affordable housing could intensify
KUCHING: Despite the property market pegged to stay subdued this year, analysts believe that competition in the affordable housing segment could intensify as more consumers demand for public housing.
AllianceDBS Research Sdn Bhd (AllianceDBS Research) in its latest industry focus highlighted that the government has already prioritised the development of public housing. PR1MA is set to complete 15,000 homes this year, which is circa 20 per cent of recent year’s average completions.
It added that 132,000 PR1MA houses are under construction now.
More middle-income households would be eligible to purchase these houses in key urban centres which are sold at between RM100,000 and RM400,000, it said.
“The raised household income eligibility to RM15,000 per month and reduced moratorium of five years will appeal to more middle-income households, indirectly posing more competition to private developers,” it said in the note.
“Developers will have to revise their product offerings to incorporate more ‘ value- buy’ properties with differentiating lifestyle amenities that will distinguish themselves from lower-priced public housing, which could come at the expense of margins.”
Meanwhile, on the performance of Malaysia’s property market, the research team affirmed its belief that the property market will remain lacklustre in 2017, driven by persistently weak sentiment, low affordability and accelerating incoming supply.
It further opined that declining property sales is expected to be the same key challenge for the sector though individual developers with niche expertise and brand names could buck the trend.
“Developers have been facing difficulties in converting their initial high bookings into sales because of stricter bank lending policies, as banks become more cautious towards the property sector.
“This is despite the keen interest shown by potential home buyers, especially genuine home occupiers,” it said.
In the near term, AllianceDBS Research noted that the property price appreciation potential could be capped given the stiff competition and rising incoming supply which has been reflected in the slower growth over the past few quarters.
“The healthy consolidation has resulted in developers being more prudent and selective with their launches as well as product offerings in the current buyers’ market.
“We believe property price growth will remain subdued in 2017, converging towards its longterm average growth rate of circa five per cent,” the research team opined.
On that note, AllianceDBS Research also noted that developers themselves have pegged a more subdued view on the prospects of Malaysia’s property market.
“Developers have also been guiding for relatively flattish sales target in FY17, in tandem with our view that the property market remains subdued this year,” it added.
As such, the research team noted that the developers’ priorities now lie in sustaining their property sales momentum, which is increasingly challenged by the soft market.
“Therefore, attractive product offerings with strong value propositions are critical to replenish unbilled sales.
“We believe larger developers with diversified geographical concentration and township exposure will be in a better position to weather the market downturn.
“This is especially so for those with large land banks acquired years ago at much lower prices which will enable them to price their products competitively,” it said.
All in, AllianceDBS Research pegged selective ‘ buy’ calls on niche property players such as Eco World Development Group Bhd, MKH Bhd and Matrix Concepts Holdings Bhd which are township developers with niche expertise and established brand names within local communities.
The raised household income eligibility to RM15,000 per month and reduced moratorium of five years will appeal to more middle-income households, indirectly posing more competition to private developers. AllianceDBS Research