KUCHING: A survey conducted recently by the research arm of Maybank Investment Bank Bhd (Maybank IB Research) has revealed that the buying sentiment is still strong but housing affordability stays an issue.
According to Maybank IB Research, while 80 per cent of the respondents intended to buy at least one property over the next 12 months (40 per cent were aged below 30; similar to our survey in July 2013), most of them (70 per cent) also acknowledged that rising living costs from petrol price/electricity tariff hikes, goods and services tax (GST) implementation and interest rate hikes would affect their purchase decision.
It added that only 10 per cent of the respondents who intended to buy a new property for investment purposes will still go ahead with their purchases as long as the properties are well-located and they are fairly priced.
“We remain cautious on the sustainability of property demand. Housing affordability is an issue and it could weaken further with higher interest rate and higher property prices on GST-related re-pricing /re-costing exercises,” the research arm said.
Maybank IB Research noted that already, the affordability index has been trending down since 2009 after the hikes in the base lending rate (to 6.6 per cent, from 5.6 per cent over 2009 and 2011) and higher property prices (an increase of 12.5 per cent compound annual growth rate versus income growth of six per cent between 2010 and 2013).
“This would impact investment decisions for new purchases and could eventually lead to a decline in property sales,” it opined.
The research arm’s other key findings from its survey included that many are still buying for investment purposes.
“Sixty-four per cent of our respondents already have at least one property in hand and just as many were looking to buy new properties for investment instead of for owner occupation,” it observed.
This, it noted, was despite the new cooling measures introduced during Budget 2014 in October 2013 and implemented since January 2014.
“Household (HH) debt reached a high of 86.8 per cent of nominal gross domestic product (GDP) at end-2013, and it could climb to 88 per cent by end-December 2014, we estimate,” it projected.
As such, Maybank IB Research believed there is still a risk that Bank Negara may further rein in HH debt expansion and curb speculative demand.
“With many potential buyers still looking to buy properties for investment purposes, further tightening measures could negatively hit demand, and in greater force,” it added.
Maybank IB Research’s latest survey has also revealed that demand for landed properties priced at below RM1 million per unit remains strong.
It noted that due to land scarcity and high property prices in the city centre, a few new property hotspots have emerged in the southern Klang Valley which are Kajang, Semenyih, Bangi and Puchong South.
“The popularity of some of these areas will be enhanced by the upcoming MRT/LRT lines.
“Beneficiaries would include MKH Bhd, Eco World Development (Eco World), Mah Sing and IOI Properties,” the research arm opined.
Generally, Maybank IB Research’s discussions with property agents and/or sales staff has reaffirmed its belief that there is a significant slowdown in demand for high-rise luxury properties.
As for property buyers’ top priorities, the latest survey has indicated that pricing and location are the main factors.
“Unlike Singapore and Hong Kong, public transportation infrastructure has yet to feature prominently on the Malaysian homebuyers’ priority list as most have not been exposed to the benefits of a complete/integrated transit system.
“However, we expect a gradual shift in mindset with the upcoming MRT lines,” it projected.
Moving on, pricing and financing were the top concerns of the 30 respondents under Maybank IB Research’s recent survey (in its last survey in July 2013, the top concerns were pricing and difficulties in getting well-located properties).
It believed that this is understandable as Bank Negara has been imposing stricter and more responsible lending rules to curb speculation.
“Our discussions with the bankers also revealed that the loan rejection rate has been as high as 40 to 50 per cent nowadays (depending on product types; affordable housing which is dominated by first-time buyers has lower loan rejection rate, we were told) compared to 10 to 20 per cent a year ago,” the research arm said.
Lastly, the survey has found that despite the developer interest bearing scheme (DIBS) having been disallowed by the government, developers are still either offering discounts but at a lower five to 10 per cent or rebates ‘quietly’ to avoid the direct impact on buyers’ affordability after Bank Negara’s new ruling on mortgage loan calculation – to be based on net pricing (post-discounted pricing) instead of gross pricing.
“Our ongoing discussions with bankers revealed that banks were still providing loans on ‘true value’, which are sales and purchase agreement (SPA) price, basis.
“We also noticed that more non-monetary freebies, club membership, semi-/fully- furnished, free maintenance fees, free tablets/hand phones, etc, were offered to offset the impact of the curbs on home loans,” the research arm observed.
All in, Maybank IB Research remained ‘neutral’ on the property sector, explaining that key risks are further tightening measures and interest rate hikes which do not seem to be reflected in current valuations just yet.
“Presently, property stocks under our coverage are trading at 0.50 to 0.71-fold P/RNAV, according to our RNAV estimates,” the research arm said.
A more opportune time to pick up on selected stocks could be at the 0.4 to 0.6-fold P/RNAV level, slightly above their recent valuation troughs.
“That said, we are more upbeat on developers who are offering well-priced products in well-connected locations which would continue to sell well,” it said, adding that its top ‘buy’ pick is Eco World while another ‘buy’ is Glomac.