Developers turn positive on industrial property market
PETALING JAYA: Although the issues of labour shortage and building material price hikes are easing, further rises in interest rate and political uncertainties could affect buying interest, and remain key risks to the property sector.
Malayan Banking Investment Bank’s (Maybank IB) Research unit said this in a property sector update, adding that developers were turning more positively to the industrial property market.
“The strong demand for industrial properties is supported by rising eCommerce activities, investment diversion from China over the escalating United States-China trade war and limited supply of industrial parks, versus other property segments,” it said, adding that these ensured good offtakes.
In its report, Maybank IB Research also said the 15th General Election (GE15) could negatively impact sales.
“Political uncertainties about GE15 could overshadow improving sector fundamentals and negatively affect buyers’ purchase of big-ticket items.
“We stay defensive in stock-picking and advocate that investors be selective.,
“We prefer Eco World Development Group Bhd and Sime Darby Property Bhd for their strong exposure in both the landed residential and industrial property segments, as well as healthy balance sheets,” it said.
It added that companies under its coverage delivered mixed sales results in the first half of the year (1H22) where 33% reported better-than-expected sales, while the remaining 67% reported slower-than-expected sales.
“While the impact of a higher interest rate has yet to be reflected in 1H22 sales, our recent conversations with developers revealed that demand for mid-to-low end properties is slowing, as low-to-middle income buyers’ affordability have been hit by the interest rate hikes in May 2022 and July 2022,” it said.
Having said that, it is difficult to gauge the actual impact of the interest rate hikes and initiatives announced under the Keluarga Malaysia Home Ownership Initiative (i-MILIKI) in July 2022, which offers similar incentives as the previous Home Ownership Campaign, it added.
It pointed out that the new i-MILIKI offered a 100% stamp duty exemptions for first-time home owners for properties priced at RM500,000 per unit and below, and 50% exemptions for properties priced between RM500,001 per unit to RM1mil per unit.
“With the i-MILIKI incentive, we do not expect major incentives for the sector in Budget 2023 on Oct 7,” it added.
Maybank IB Research, which has a “neutral” call on the sector, said on the upside, there is the stronger-than-expected property sales factor driven by an improving economy as well as the easing of lending measures by banks.