Malaysia’s property sector will be hampered by property curb measures in 2014, particularly in primary markets which had seen strong growth in recent years due to incentives offered by developers.
Alliance Research Sdn Bhd (Alliance Research) head of research Bernard Ching noted that to counter excessive speculation and rein in price increases, the government has introduced several measures to curb rising property speculation.
“These measures will dampen the demand for properties, particularly in the primary markets which have seen strong growth in recent years due partly to incentives offered by developers,” he outlined in the group’s strategy report for the year ahead, adding segments which are most at risk include hybrid high-rise developments such as small office home offices (SOHOs) which have largely been driven by speculative demand.
“We expect property curb measures recently announced will lead to moderation in transaction volume as well as price increase. We rule out the possibility of any fire sale given low unemployment rate, and absence of any systemic financial crisis.”
Ching noted that the property sector has significantly outperformed the benchmark FBM KLCI in 2013.
The KL Property Index has surged by 44.2 per cent to reach an all-year high of 1,519.25 on 29 May which was given a boost post 13th general election on 5 May.
However, profit taking activities and concerns over measures to curb property transactions have led to a subsequent 14.9 per cent correction, he added.
Despite that, the KL Property Index still posted a gain of 22.7 per cent vs FBM KLCI’s 9.2 per cent gain up to December 10.
The research team at TA Securities Hondings Bhd (TA Research) affirmed that the domestic property sector was already showing signs of readiness to embrace a softer period ahead given these measures.
“Our channel checks revealed that some developers are already re-strategising their new launches next year,” it said in its Annual Strategy 2014 report.
“For instance, Glomac had decided to postpone the launch of commercial properties and high-rise serviced apartments to 2015 and focus on landed residential properties which are perceived to have resilient demand.”
Meanwhile, strong property demand has led to a sharp price increase for properties in Malaysia, highlighted Alliance Research’s Ching.
“Following the global financial crisis in 2008, interest rate has been kept at exceptionally low levels for extended period of time,” he explained. “Together with easy financing schemes provided by developers and banks, primary transactions have picked up significantly due to improved affordability.
“This has led to sharp price increase over the last three years where the year on year (y-o-y) change in quarterly all-house price index has surged beyond 10 per cent as compared to historical average of 5.1 per cent.”
TA Researdh did not t think Malaysian property prices will suffer from a severe reduction in capital value given steady demand for property driven by Malaysia young population (median age = 27.1 years).
“Baby boomers born during 1979 to 1986 (age 27 to 34), who are now in the work force, could be on the look-out for their home for their first home,” it noted. “Besides, the expected cost push factor resulting from GST implementation and subsidies rationalisation could act as price stabiliser as well.
“In fact, before the GST come into effect in April 2015, we do not discount the possibility of a property rush towards the tail-end of 2014.
“As such, we foresee significant cooling off in buying only in 2Q15 as urgent buyers would have lock-in purchases before that whereas the sidelined buyers/investors will adopt waitand- see attitudes in order to access the implications of the latest policies.”
Meanwhile, should property prices remain stubbornly high in the future, TA Research said this would aggravate the threat of further cooling measures, which can be evidenced from the actions taken by the government of Singapore and Hong Kong.
“Judging from the timeline of the recent slew of cooling measures, we deduce that Malaysia property sector will continue facing extensive policy risks, as long as the pace of Housing Price Index (HPI) growth stays above the five-year average growth of 8 per cent y-o-y.”- The Borneo Post
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