Publication: NST
Date of publication: May 10, 2013
Section heading: Real Estate Decor
Page number: 004
A strong market pick-up as a result of pent-up demand and renewed confidence in the market by local and foreign investors is the overwhelming opinion among analysts on the outlook of the property market following a Barisan Nasional win. The research houses include RHB Research, Am Research and CIMB Research.
RHB Research points to several key catalysts as follows:
(i) Uptick in population growth cycle;
(ii) Influx of liquidity driven by low interest rate;
(iii) Consistent GDP growth; and (iv) Catalytic developments, such as the MRT link between JB Sentral and Woodlands Singapore, potential MRT Line 2 and 3, High Speed Rail, as well as the soon-to-be completed Penang Second Bridge.
We expect demand to make a comeback. This year, both the mid-end and high-end segments in the physical market are expected to do well, says the report. While the mass-housing segment will be driven by the local population growth, the higher-end segment will be boosted by foreign buyers.
The report adds that the growing young demographics (age group of 15-65) will continue to underpin the demand for property in Malaysia, in particular, the mid-end mass housing segment. The recent hot selling at IJM Land's Bandar Rimbayu and UOA's Desa Green are good examples. We see a correlation between the ARPP (average residential property price) as well as the change in population growth.
The research house is of the view that asset reflation will be the phenomenon in Southeast Asia (except Singapore). Apart from the low interest rate cycle, the liquidity is also encouraged by lower policy risks in the region. Various regulatory measures have been imposed in the regional countries such as Hong Kong, Singapore and China to curb the overheating property markets and foreign purchases.
Although the household debt in Malaysia has accelerated to 80.5 per cent of GDP in 2012 (from 75.8 per cent in 2011), the Central Bank has recently indicated that the growth of credit to households has begun to moderate. We thus do not anticipate any drastic tightening measures to be imposed this year. We believe interest rate will remain low as the US Fed is likely to keep the rate low at least until mid-2015.
Aiding the anticipated upturn in the property cycle is the stabilising of the European debt crisis and the prevention of a fiscal cliff in the US early this year.
RHB Research is also of the view that the consistent GDP growth in Malaysia (5.4 per cent for 2013) will hold up investors' confidence in property purchases and investments. We expect the property sector to sustain its momentum from late 2012 with the commercial and residential property sales growing by 11.2 per cent and 10.0 per cent respectively in 2013, from a weaker growth of 0.6 per cent and 9.6 per cent in 2012.
Sales statistics from most of the developers have so far confirmed its view. Based on the projects in the pipeline, we are confident that developers will at least maintain their sales growth at 15-20 per cent, with SP Setia seeing its major growth driven by overseas projects.
Hotspots continue to be hot
The report is of the view that key property hotspots such as Kuala Lumpur, Iskandar and Penang will continue to attract foreign buyers. Among the projects within these hotspots that are likely to stand out this year are:
(i) Penang - Penang Second Bridge: Expected to be completed in September this year, the bridge is expected to have a significant economic impact on the Batu Kawan area. Many multinationals have already committed their investments and are currently constructing their plant in the Batu Kawan industrial area. Just recently, the Penang state government has also announced its plans to set up a Premium Outlet at Bandar Cassia next to the PSB interchange. IKEA, the famed Swedish furniture and furnishing company, has also indicated its interest to set up an outlet on the mainland, given the growing industrial and business activities, expanding population and townships, as well as cheaper land costs. Having 600 acres of land close to the second bridge, Tambun Indah is set to be the beneficiary.
After the election, EO is likely to obtain the final approval from the state government for its 760-acre Seri Tanjung Pinang 2 project. The state government will use 110 acres (on net basis) of land on STP 2 to offset some of its road infrastructure spending on the island.
(ii) MRT link, and possibly third link: Developers who already have the right exposure in Iskandar are currently enjoying the strong demand from Singapore. Some developers who have yet to have material exposure down south are busy scouting for landbanks there.
Investment interest from the Singapore is no longer lagging. The relatively cheaper pricing for Malaysia properties, the currency strength as well as the low borrowing rate in Singapore are the key factors driving the buying momentum. In addition to some participations of highprofile individuals and renowned corporates and organisations, such as CapitaLand, Temasek, Ascendas and Country Garden, selling price for some properties in the primary market as well as landbank has hit to levels never seen before. Some highrise condo and serviced apartments in the JB city centre, Puteri Harbour and Danga Bay are now going at RM1,000 - RM1,500 psf.
Interest will heighten again this year. We believe developers as well as property buyers will concentrate on certain `high-growth' areas, particularly areas surrounding the MRT link - JB City centre/JB Sentral, and Kempas. A new integrated transportation hub will be constructed, similar to the KL Sentral in the Klang Valley, catering for the interconnecting KTM commuter rail network, as well as feeder bus and taxi services.
(iii) Klang Valley - High Speed Rail Link (HSRL), MRT Line 2 and 3: The high-speed rail link (HSRL) was recently agreed between the Malaysian and Singaporean government. It is targeted to be ready by 2020. The HSRL is a big re-rating catalyst for Malaysian properties, particularly the KL property market over the long term. It is a new growth driver for high-end properties in KL city and Mont' Kiara.
Coupled with the MRT network (three lines altogether) resulting in a substantial increase in population flow, not only the residential properties but also the commercial properties (retail malls, and perhaps offices and hotels) could receive a boost in demand and hence valuations in the future. Indeed, we started seeing some foreigners mainly from Singapore, China and Hong Kong buying up properties in KL and Mont' Kiara, a convincing sign of liquidity.
Therefore, we believe there could be a niche opportunity for some branded developers to launch some premium high-end luxury condo projects in these locations. Some of the recent successful projects are St Regis and Banyan Tree Signatures Pavilion KL, recording over 70 per cent take-up rate with average selling price of over RM2,000 psf.
From a regional perspective, these prices are still relatively low when compared to the most expensive properties in Singapore, Hong Kong and China city centres. In the pipeline, there are a few notable projects within the KLCC vicinity which are targeting the same segment including EO's The Mews, Dijaya's W Residences, Wing Tai's Le Nouvel, Ireka's RUMA serviced apartments, and The Four Seasons Place.
We believe the revelation of MRT Line 2 (the circle line) and Line 3 will be announced post-GE. The circle line looping the KL commercial hub is another boost for the city centre properties. Line 3 could potentially benefit certain commercial/residential enclaves, such as UOA's Bangsar South, IJM Land's Pantai Sentral Park and SP Setia's KL EcoCity.
Key KL-based players that will benefit the most from these transportation networks are UEM Land, SP Setia, IJM Land, Sunway, UOA, KLCCP and Pavilion REIT.
We think the Iskandar theme will likely dominate the sector this year. The new listings of Iskandarbased developers, such as Iskandar Waterfront Holdings (IWH) and Medini Iskandar, are expected to create positive spill-over to other developers with sizeable exposure to Iskandar, such as Keck Seng, UEM Land, MPHB, Crescendo, Sunway, KSL, etc.
UEM Land has achieved a great milestone, with the latest entrance of Ascendas lifting the greenfield Gerbang Nusajaya to another level. Sunway will be a long-term play in Iskandar, with an ambitious plan to replicate its successful integrated Bandar Sunway township down south.
Am Research is similarly of the view that the development of the Iskandar Region would resume. It is likely that the BN government would pursue closer ties with Singapore to develop the area, it says in its report, adding that UEM Land is their preferred pick, with Mah Sing and IJM Land also in its favourite list. CIMB Research has also singled out UEM Land as one of the biggest beneficiaries post-GE as it has historical ties with UMNO and is a favourite election play.
More JVs, transactions
RHB Research anticipates more announcements on joint-venture de velopm en t s an d lan db ank transactions in the Malaysian property scene. These include IJM Land's collaboration with some strategic partners for The Light Phase 2 commercial component. EO, too, will have additional plans to add value to the Integrated Wellness Capital project at Medini. MA's, which are rather speculative at this juncture, could also potentially surprise the market. Various rumours on KSL have been circulating in the market, including the possibility of privatisation as well as the disposal of KSL City shopping mall. The possibility of IJM Land buying over 50 per cent stake in Bandar Rimbayu from KEURO is also well on the cards.
Am Research meanwhile says BN may roll out sizeable infrastructure projects to solidify its grip in Sarawak. The projects include the 500kV transmission lines, construction of new hydro dams and fast-tracking the development of the Samalaju Industrial Park. There projects were previously put on hold.
The research house further says it remains to be seen if there would be a consensus between the BN-led Federal government and the Opposition-controlled Selangor in the long-awaited development of some 3,300 acres of land in Sungai Buloh by EPF owned Kwasta Land. This is because all land matters fall under the purview of the state government.
CIMB Research meanwhile expressed the view that the country's growth potential would ultimately depend on the extent of compromise over its reform agenda in the near term. Reform momentum could hit a snag. Without a strong mandate from the people as well as potentially months of political infighting after the general election, some of the policy reforms could be put on the backburner or progress slowly. This will throw off the government's reform credibility and dent investors' confidence in the sustainability of the country's growth momentum. Unpopular measures such as the GST and subsidy cuts could be delayed on worries of political backlash.
It adds: To gain political mileage, more populist measures, including cash transfers, could be in store and if not accompanied by earlier planned tax reforms and subsidy rationalisation, the country's fiscal-reduction plans could be at risk.
Table 1: Post-election property market outlook at a glance
* The removal of election uncertainties and continuity of government would aid buying sentiment. Market may see strong pick-up from pentup demand
* Broad policies would remain relatively unchanged over the next 12 months irrespective of any leadership changes within Barisan
* Key property hotspots such as Greater Kuala Lumpur, Iskandar and Penang will continue to attract foreign buyers
* Interest rate and unemployment rate will remain low
* No drastic tightening measures expected to be imposed this year
* Continuity of growth policies in the Economic Transformation Programme (ETP)
* The consistent GDP growth in Malaysia will hold up investors' confidence in property purchases and investments, supported by solid fundamentals and strong catalysts
* Catalytic developments, such as the MRT link between JB Sentral and Woodlands Singapore, potential MRT Line 2 and 3, High Speed Rail, and the soon-to-be completed Penang Second Bridge, expected to boost the property sector
* Excess liquidity will be parked in tangible assets, including real estate and properties as a hedge against inflation
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