House prices remain under pressure from discounts or rebates
KUCHING: House prices remain under pressure, analysts observe in a property update, on the back of discounts or rebates given by property developers to spur property sales.
Affin Hwang Investment Bank Bhd (AffinHwang Capital) gathered that rebates could be 10 to 20 per cent, especially for unsold completed units.
“This has put pressure on secondary market prices for homes,” the research firm said.
“As a result, the Housing Price Index ( HPI) growth slowed to the lowest since 2010 ( latest base year for HPI calculation) to 0.2 per cent year on year (yo-y) in the third quarter of 2019 (3Q19).
“Traditionally, property is viewed as an asset class for hedging against inflation. However, HPI growth of 0.2 per cent y- o-y has lagged consumer price index (CPI) growth of 1.3 per cent y- o-y in 3Q19, the first time since 2010.”
However, AffinHwang Capital projected that there will be recovery in property transaction volume growth.
The research firm believed the weak house price appreciation affected market sentiment, leading to muted property transaction value growth in 2019 as buyers turned more cautious.
“Furthermore, demand for affordable housing remains the key driver for property transactions. As a result, total property transaction value growth was 2.1 per cent y- o-y to RM103 billion compared to total property transaction volume growth of 6.3 per cent y- o-y to 243,400 units in the first nine months of 2019 (9M19).”
Coupled with the continued rise in house prices in 2016-2018, AffinHwang Capital believed affordability issues remain as household income growth is likely to lag nominal gross domestic product (GDP) growth.
An indication is large listed companies have seen negative earnings growth over the past few years and they are likely to keep tabs on employee salary increments to control cost.
“We expect the house prices to remain flat in 2020 on expectations of prolonged weak market conditions.”