KUCHING: Retail properties, especially shopping malls, are expected to remain resilient while affordable housing is still a focus in the property sector, analysts at AmInvestment Bank Bhd (AmInvestment) said following industry update from a recently held property seminar.
“The outlook of the property sector has been uncertain since the 14th General Election (GE14) as developers deferred their new launches while buyers held back their purchases.
“Now with a clearer political landscape accompanied with the government’s initiative to address the challenges in the property market as proposed in Budget 2019, we believe the situation will improve in the long term,” the research team said.
It noted, speakers at the seminar were of view that the outlook for retail properties, mainly shopping malls, would remain resilient in the short to medium term. This is consistent with real estate investment trusts (REITs) under its coverage as these companies have reported high occupancy rate in their shopping malls.
“The Malaysian Institute of Economic Research’s (MIER) Consumer Sentiment Index (CSI) retreated to 107.5 points in the third quarter of 2018 (3Q18) after a spike to a 21-year high of 132.9 points in 2Q18.
“The trend implies that consumers are still optimistic but remain cautious and selective in spending plans,” it noted.
As for residential properties, AmInvestment pointed out that speakers at the seminar had projected that the market could begin to turn positive in 2019 driven by the feel-good factor after GE14, the implementation of new policies in Budget 2019, and a stable economic outlook with the support of domestic consumption and investment.
“Affordable housing remains one of the key priorities of the government. The extension of step-up financing for the lower income group will improve investor sentiment on the sector, especially for developers with more exposure to the affordable housing segment,” AmInvestment said.
Meanwhile, on the demand for industrial properties, the research team noted that this could be driven by the logistics and warehousing segments which are largely supported by the emergence of e-commerce.
“The preference of logistic warehouses will likely continue to be within the Klang Valley, largely in Shah Alam, where there is a large concentration of manufacturing activities and distribution centres,” it explained.
As for the outlook for the office sector, AmInvestment noted that the segment could be in the negatives for the medium term due to an oversupply as 20 million square feet (sqft) of additional office space in Greater KL (presently 123 million sqft) are targeted for completion in the next four years while market absorption remained lagged.
“KL City will experience the greatest impact, with 9.7 million sqft scheduled for completion in the next three to four years. Yields are under pressure as a result of higher construction costs and weaker rents,” it explained.
Overall, despite its slight positive sentiments on the outlook of the property sector after policies have been announced during Budget 2019, AmInvestment still retained a ‘neutral’ view as it does not expect to see surprises in the earnings for the next 12 months.