SOS Is the worst over for Residential Properties?




MALAYSIA RESIDENTIAL PROPERTY MARKET

1)  Overhang Volume (exclude service apartments and soho)

2016   14,795 units

2017   24,738 units

Increased 9,942 units or 67%.

Overhang = completed yet remained unsold for > 9 months after its launch

2) Jan & Feb 2018 transactions improved 4% (yoy 2017)

3) Concern of overhang - recent months led to the future deelopment freeze on luxury properties >RM1m in major cities

4) Overhang by States

    Johor 17.7% (4,376)

    Penang 15.8% (3,916)

    Kedah 15.3% (3,783)

In Johor - majority of the overhang comprises of condos/apartments priced RM500,000 to RM1mil.

5) In Nov 2017, BNM said unsold residential properties is 10 year high (majority RM250,000 and above)

6)  Based on population growth 1.3% or 390,000, based on household of 4, we need 97,500 but annual completion are only 78,216

So, there is a mismatch of PRICE, LOCATION and PRODUCTS.

7) BNM estimates average Malaysian can afford houses priced RM250,000 and below & 80% launches in 1H of 2017 were price beyond RM250,000.  50% of the lanuches is over RM400k and 25% were above RM500k.

8)  JPPH recorded residential property market

2017   194,684 transactions  RM68.5b, 4.1% lower than 2016, but 4.4% higher in value.

9) Shops - overhang value RM3.3b, 16.3% (mainly for shops above RM750k represent 72%), top by Johor, followed by Malacca andKedah.

(extracted from The Star 21 April 2018)

VIEWS

Basically, for residential properties, there is a mismatch in Price, Locations and Products.  Mismatch of price will not subside, even the RWIP (Affordable apartments) I know in KL is at least RM300k (with facilities).  Land price did not dropped, hence, it is very hard for developers to built anything below RM250k and still make decent profits.

The top 3 overhang is in Johor, Kedah and Penang.  

As for secondary market (especially for luxury condos i.e. above RM700k), may be a MAJOR concern as they are delivered in 2017,18, 19.  As currently is the tenants market, many are slow to be rented out or can be sold above their purchase price in Klang Valley.  JPPH did not have any statistics on this.  There any development are built near LRTs and MRTs (hot spots) at prices above RM700k, are coming onstream.  That is why, rental is dropping (due to oversupply of condos) and secondary market for condos above RM700k will face with problems selling (lack of buyers). 

However, due to more stringent rules by BNM and banks on developers and borrowers, this may drag until 2019/20 (especially for condos above RM700k).  Besides Empire City (delayed for 2 years), other major mixed development on the way is Pavilion Bukit Jalil and Pavilion Damansara.  Was informed prices within 1km of KLCC faces resale problem and also dropped in rental as much as 25%.  Every areas have their own similar overhang problems (new launches, completed, going to complete).  So, it is very much depends on BNM, Banks and the Government to resolve these problems.



PROPERTY STOCKS

Because of the above poor sentiment, all property listed on KLSE dropped from 30-60% (a bit overdone).  Hence JVs, affordable homes, residentials & hotspots (near universities) will be a good strategy to ride out the slow down in property.  However, there are few gems available, especially those who has sufficient fund to monetise their land banks.

So it must have the Right Price, Right Locations and Right Products.

Be selective and have a longer horizon, propery sector will be bullish again. 



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