Saturday, August 20

MRT, HST cancellation dampens property outlook


KUCHING: The cancellation of several projects such as the Mass Railway Transit (MRT) 3 Circle Line and the High Speed Railway (HSR) connecting Singapore and Malaysia will will have a negative impact on developers who have invested in projects surrounding those localities.

AmInvestment Bank Bhd (AmInvestment Bank) in a sector outlook yesterday opined that the cancellation of the MRT 3 Circle Line would affect certain locations in Kuala Lumpur as they will become less popular without an MRT station.

The MRT 3 line, which was planned to run along the boundary of the Kuala Lumpur city centre, would have included Ampang Jaya, Kuala Lumpur City Centre, Jalan Bukit Bintang, the Tun Razak Exchange, Bandar Malaysia, KL Eco City, Pusat Bandar Damansara, Mont’ Kiara and Sentul.

“The cancellation of the MRT 3 will hit developers who acquired and planned developments along the line,” it affirmed.

“Nonetheless, these areas are mostly matured townships and the impact will not be too significant.

“The government’s decision to scrap the HSR will have a negative impact to developers who have invested on projects that were supposed to be close to the stations such as Bandar Malaysia, Putrajaya, Melaka, and Iskandar Puteri.

“This also means that Melaka would not benefit from the Greater KL extension as the development of Greater KL southwards would not be as be as quick as planned initially.”

This comes as the change in government has created some short-term uncertainties, AmInvestment Bank said, hence developers are deferring new launches while buyers are holding back their purchases.

“Changes of key personnel in government departments may slow down the approval process for new projects. Nonetheless, we believe the current uncertainty is only temporary and will settle down once the political landscape is clearer,” it added.

Meanwhile, the property sector is boosted by the abolishment of the Goods and Services Tax (GST) as it will improve buyers’ sentiment in the current property market downcycle.

AmInvestment Bank said the implementation of zero-rated GST will provide some relief on developers’ margins where savings on cheaper building materials will be passed back to buyers.

“Nonetheless, we do not see this as the turnaround for the sector because the market is still flooded by oversupply and affordability issues, and we believe buyers will remain cautious amid the short-to-medium-term uncertainties.

“Moreover, we do not expect significant reduction in selling prices on existing inventories as raw materials purchased by developers are already charged GST.”

To note, unsold residential properties in Malaysia rose to their highest in a decade in 2017 at 146,497 units.

According to a survey by the Malaysian Institute of Estate Agents (MIEA), more than 50 per cent of respondents have rated “poor” on the market outlook for the retail property sector and high-end serviced apartments, condominiums and SOHOs.

Meanwhile, affordable residential properties and mid-range landed residential properties are expected to remain stable, according to the survey. The MIEA also noted that the rent-to-own scheme is positive for home buyers as it provides an alternative for the low-income group to own homes despite financial challenges.

AmInvestment Bank maintained its neutral callL on the property sector as various headwinds remain including the generally still elevated home prices, rising interest rates, and house buyers’ inability to qualify for a home mortgage due to their already high debt service ratios.