Property market heading for cyclical slowdown — Affin IB

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Malaysia’s property market is believed to be heading for a cyclical slowdown after a strong four-year property bull cycle. — Bernama photo

KUCHING: Malaysia’s property market is believed to be heading for a cyclical slowdown after a strong four-year property bull cycle.

While long-term fundamentals such as demographics and economic growth have remained positive, the research division of Affin Investment Bank Bhd (Affin Research) said some short-term factors that are cyclical in nature have started to deteriorate.

“Broadly, we expect developers to achieve lower take-up rates and weaker profit margins in view of higher competition, cautious bank lending, implementation of tough government property cooling measures and lower affordability,” highlighted analyst Isaac Chow in a report.

To cushion the slowdown, Chow said developers have fine-tuned their product line-up and marketing strategy.

This includes launching new projects across different property hotspots to diversify geographical risk and tap into a larger pool of buyers.

“The developers are also switching their product mix to launch more landed properties where demand is more resilient, and stepping up their marketing campaigns to attract foreign buyers from Singapore, Indonesia, China, Hong Kong and Japan,” the analyst said.

Meanwhile, Affin Research also observed that government linked companies, government-linked investment companies (GLICs) and state agencies are becoming increasingly active in property development.

“While some of the upcoming government-led property projects offer good opportunities to the eventual project winners, it poses substantial competition to others, especially when several government projects (TRX, Medini) are packaged with special incentives and/or excellent government funded infrastructures,” Chow added.

Notwithstanding its cautious view on the domestic property market, Affin Research expect developers’ earnings for 2014 and 2015 to remain resilient, underpinned by high unbilled sales.

“Overall, we forecast the six developers under our coverage to achieve 15 per cent earnings growth in 2014, tapering off to five per cent in 2015, driven by higher overseas earnings from the sector heavyweights like IOI Properties Bhd and SP Setia Bhd as well as gain on land disposal by Tropicana Corporation Bhd,” Chow concluded.