By ---use-custom-author-field---
With the 13th general elections over, property sales should return to normal with new sales gathering pace, and investors likely to focus on the fundamentals of property companies.
“We are raising target prices for our property stocks by 11 to 59 percent after narrowing our discounts to revised net asset value (RNAV) by 10-40 percentage points and adjusting for appreciation of land values, particularly in the Iskandar region,” CIMB Investment Bank’s head of research Terrence Wong said in “Property Market Report for 2012”.
He added that CIMB now valued developers UEM Land and Mah Sing at a 10 percent premium to RNAV as leading developers can trade at 20-40 percent premiums during property up-cycles.
Other than the two, CIMB also upgraded Mah Sing, Eastern & Oriental (E&O), UEM Land and UOA Development to Outperform while keeping SP Setia a Trading Buy due to shareholding and management risks.
The bank backed research house added that the outlook for the residential property sector in 2013 was somewhat dampened by the 13th general elections.
“Buying already started to slow down ahead of elections as purchasers waited for election results before making major investment commitments. Also, a 5 percentage point hike in the real property gains tax from 1 Jan 13 as well as more stringent approval criteria for housing loans by banks helped to cool down new sales.
“Developers, too, held back on new launches and landbanking as they waited for elections to be over. With elections now over, we believe purchasers will return and new launches and sales should gather pace,” Wong said in his report.
Wong stated that many developers are eyeing greater new sales in 2013 compared to 2012, and are on track to meet those targets.
SP Setia had sold RM4.23 billion worth of properties in FY2010/12 and hopes to achieve RM5.5 billion in FY2013, while Mah Sing and UEM Land have target sales of RM3 billion for 2013 after hauling in RM2.5 billion in 2012.
UOA Development believes that it can up its performance of RM1.7 billion in 2012 to RM2 billion this year.
Overall house price appreciation in 2013 is anticipated to moderate to between five percent and 10 percent after two years of strong gains.
Oversupply in commercial spaces remains a problem, but there has been a significant scaling back of developments under construction and planning since 2011.
According to 2012 statistics, the future supply of office space in Malaysia as a percentage of the total stock had fallen from 25.5 percent in 2011 to 14.5 percent. For retail space, the percentage had fallen from 30.5 percent in 2011 to 13.2 percent.
The value of properties transacted in 2012 increased four percent to RM143 billion, compared to much larger gains of 33 percent in 2010 and 28 percent in 2011— Wong said. 2012.
Residential transactions charted a positive increase of 10 percent in transaction value to RM68 billion in 2012, making up 47 percent of total value transacted.
“For the first time since 1996, average house prices in Malaysia appreciated by double digits,” Wong said in his report.
House prices rose 11.8 percent in 2012, led by Selangor which gained 16.4 percent, Pahang which strengthened 15.3 percent, Penang up 12 percent and Kuala Lumpur 11.1 percent.
“We do not see a bubble forming as the price gains have been well supported by jumps in household income in the past three years,” Wong added.
In terms of location, the Klang Valley is the largest market, holding half of the total transaction value, with Johor trailing next at 12 percent and Penang at 9 percent.
While value transacted was significantly higher, the overall transaction volume was marginally or one percent higher.
Adversely, transaction volumes for commercial, industrial and agriculture properties contracted 5-6 percent, while there was a dip of 1 percent in the overall transaction volume in the property sector.
Semi-detached housing proved to be best performing, gaining 16.9 percent in Selangor and a sizable 24.1 percent in Kuala Lumpur. Although high-rise properties gained 16 percent, they have yet to catch up to their landed counterparts.
“While house prices in Malaysia had increased at a 3-year compounded annual growth rate (CAGR) of 9.4% to exceed income growth of 7.5% over the same period, we view this as a catch-up,” he says. If you were to extend this and take a longer horizon of eight years, both house prices and income would have grown at the same rate of 5.5%.
Dismal supply growth in the residential sector is one of the causes of the rise in house prices, CIMB records. The past decade or so has seen annual supply growth fall from double digits to under 2%, with 2012 charting the the lowest growth at 1.6%.
Commercial spaces had an unimpressive performance in 2012, with occupancy of office space falling for the fifth straight year in Kuala Lumpur where demand growth of 4.8 million sq feet was overwhelmed by new supply growth of 7.8 million sq feet. Occupancy rates for offices in the three largest property markets in Malaysia (Klang Valley, Johor and Penang) are among the lowest in the country.
The retail -space market charted a similar disappointment, with demand for space in Kuala Lumpur increasing by merely 41,000 sq feet. Yet, notes Wong, the poor demand continued to be a negative surprise as retail REITs are still doing very well, with a long list of tenants waiting to move in.
Overall occupancy in Klang Valley slid 1.1 percentage points to 81.7 percent but still maintained above the national average, with Kuala Lumpur’s occupancy improving 1.1 percentage points to 83.4 percent and Selangor’s sliding 2.8 percentage points to 83.2 percent.
Unsold residential properties remain manageable at 63,000 units across the country, with total unsold stock out of total housing stock in Klang Valley being only 1.1 percent, lower than the national average of 1.4 percent.
You must be logged in to post a comment.