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Property

Malaysia expects resilient property market despite overhang

Affordable housing push, steady growth likely to sustain sales momentum

According to Napic's data, there were 99,222 transactions worth 34.65 billion ringgit ($8.3 billion) in the first half of 2019, an increase of 6.1% in volume and 9.5% in value.   © Reuters

KUALA LUMPUR (Nikkei Markets) -- Steady economic growth, a fresh housing policy and incentives to boost affordable dwellings will keep Malaysia's property market resilient in the final six months of this year despite a heavy supply overhang, the government said Monday.

Measures, including extension of a state-led housing ownership campaign, are expected to sustain the sales momentum through December-end after home sales rose in both transaction volume and value in the first half of the year, the state-run National Property Information Center said in a statement. Further, a policy to rein in speculation would also help to ease the unsold supplies, the government agency said.

"Affordable housing and finding the right solutions to the property overhang continue to be the main agenda of the government," the agency, also known Napic, said.

According to Napic's data, there were 99,222 transactions worth 34.65 billion ringgit ($8.3 billion) in the first half of 2019, an increase of 6.1% in volume and 9.5% in value.

The print comes as the government grapples with sluggish wage growth and high cost of living amid soaring property prices in key cities that have prompted several consumers to delay or scrap purchases of big-ticket items such as real estate and cars.

"Although the gross domestic growth was strong in second quarter, people are cautious in spending," said Deputy Finance Minister Amiruddin Hamzah.

Malaysia's economy grew a faster-than-expected 4.9% in the second quarter.

To clear inventory, property developers have offered discounts, while delaying new launches.

"Depending on locations, it would take longer for the market to absorb the properties," said property developer MKH Managing Director Eddy Chen. "Some developers might reduce prices," added Chen, who is also a former president of Real Estate and Housing Developers' Association Malaysia.

However, the number of completed-but-unsold homes continued to increase, rising 1.5% to 32,810 units worth 19.76 billion ringgit ($4.7 billion), data from the government agency showed. About 43% of these stocks are condominiums priced between 200,000 ringgit and 300,000 ringgit a unit, Napic said.

"We previously thought those overhang properties are those high-end, (costing) more than one million ringgit," said Amiruddin. "But our data showed they are mostly from the affordable range. Post-mortem needs to be done."

Previous efforts to tighten lending regulations and crack down on speculative activities have squeezed credit flow in the third-largest Southeast Asian economy. Overall household debt also remained elevated at 82.2% of gross domestic product, the central bank cautioned last week.

"While the mismatch between housing supply and demand is likely to take some time to resolve, firm demand for affordable housing is expected to mitigate risks of a sharp and broad-based decline in house prices," Bank Negara Malaysia said.

Earlier this year, the government launched a one billion ringgit ($243 million) fund to offer cheaper mortgages to lower-income groups, and unveiled the National Housing Policy that seeks to build one million units of affordable homes for the bottom 40% income group within the next decade.

"As for the local buyers, we will see whether we will extend the home ownership campaign especially in dealing with the unsold units," Housing Minister Zuraida Kamaruddin said at a news conference.

Still, analysts said the current inventory pile up, and intensifying competition in the market indicate blurry prospects for Malaysia's property sector, while developers will likely have to contend with weak profits in the near term.

"Malaysia's property market will need at least another three years to absorb the unsold properties, assuming status quo in historical transaction volume," AllianceDBS Analyst Quah He Wei wrote in a Sep. 19 report. "A meaningful recovery for the property market is only expected by 2023."

-- Yimie Yong and Jason Ng

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