Rocky road ahead for property sector

Experts are cautious particularly on luxury residential and commercial units, as well as decentralised areas


High-End and low-end properties are not expected to see any immediate rebound as affordability, excess stocks and economic and political concerns cast a dark shadow over the once vibrant sector.

Experts are cautious on the property market as its overhang in key segments, particularly luxury residential and commercial units, poses a threat to the sector.

Developments in decentralised areas with less connectivity and poor amenities, especially government- driven housing projects, and securing end-financing would continue to be major concerns.

Affin Hwang Investment Bank Bhd analyst Loong Chee Wei said the property market is far from seeing any recovery due to the rising cost of living and the disconnection between the society’s income and affordability level.

“Although there are signs for some appreciation in overall price index, resulting to a slight uptick in volumes, but they do not reflect the vibrancy in the market.

“Transaction volumes may rebound in the second half of 2018, rather than seeing negative contraction since the last two to three years,” he told The Malaysian Reserve.

Loong said there would be some adjustments to cater to the inflationary pressure, but the situation is further compounded by the upcoming general election, which is expected to take place this year.

“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 Datuk Abd Hamid Abu Bakar said, this year will continue to be a buyers market and less favourable for sellers who intend to flip their properties for a quick and hefty return.

“Amid the challenges faced by the sector in the last three years due to various external and internal macro- economic indicators, returns in property sales are 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, adding that this situation is further catapulted by challenges in end-financing as the central bank continues to enforce a strict lending policy.

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

“The market is turning around to this fact, which in the meantime would create some dislocation in the market,” he said.

He said to ensure a balance between supply and demand is to put in place policies and market features that will prevent the current situation from further deteriorating.

“This should be done through market mechanisms with the aim of ensuring the highest possible level of market efficiency in connection to the greater free flow of quality information from various quarters,” Fernandez said.

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

Knight Frank Malaysia research and consultancy ED Judy Ong said the recent freeze on four components of the property market, that include condominiums and serviced apartments priced RM1 million and above, is expected to provide a breather to the challenging luxury residential sector.

“Developers are expected to take stock of the situation by reviewing and re-planning their proposed products and may further defer property launches,” she said in a statement.

“We expect to see more bite-size units which translate to lower quantum pricing (< RM1 million) coming into the market although moving forward, there may be risk of oversupply in this category of units,” she said.

Data by the National Property Information Centre (Napic) revealed that there were 130,690 unsold residential properties in the country during the first quarter of 2017 — the highest in a decade.

The 130,690 unsold units in Napic’s findings included overhang (completed, but unsold) units and unsold under construction units, as well as SoHo (small office/home office) units and serviced apartments.

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.

Subsequently, data from the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEP) showed that the value of unsold and unutilised properties — both commercial and residential — stood at an estimated of RM35.5 billion.