The local property sector is not out of the woods going into 2023, with its long-term dynamics still on the mend, says Hong Leong Investment Bank (HLIB) Research. In its latest report, the research house believes the housing oversupply issue is easing, which in turn will support a healthier increase in house prices moving forward.
“However, the biggest stumbling block to the sector recovery remains the labour shortage situation, which impedes the acceleration of site progress and developers from pursuing more aggressive launches,” it added.
HLIB Research noted property developers under its coverage registered commendable third-quarter (3Q22) results, with four coming in above expectations, three within, and one below. When stacked against consensus, there were two above, five within, and one below expectations.
For developers with sales trailing targets, HLIB Research noted this was mainly due to a slowdown in new launches for the year. It added the main reason for the slowdown in launches was due to supply-side issues such as the labour shortage and volatile building material costs. The research house expects the labour shortage issue to persist in the near term, impacting developers’ progress and billing recognition.
According to the National Property Information Centre or Napic preliminary 3Q22 housing data, residential transaction volume saw a healthy pick-up of 11.2% quarter-on-quarter (q-o-q), supported by the economic recovery and healthy job market and rose 56.2% year-on-year (y-o-y), given the low base in the previous year due to lockdown restrictions.
Due to the lack of new launches this year, sales are mainly supported by completed units and ongoing projects, thus, contributing to the easing of unsold units. Malaysia’s House Price Index (HPI) eased 2.1% q-o-q and was flattish at 0.7% y-o-y.
HLIB Research noted the economy is expected to be more resilient, anchored by firm domestic demand, recovery in tourism activities, and large infrastructure projects. Under the new administration, reining in inflation and managing the cost of living is at the top of the government’s agenda which should augur well for property demand. Furthermore, building material costs such as steel bar prices have come off the mid-year peak by around 15% to 20% with the exception of cement prices, which are creeping up again with the current levels matching their peak during the middle of the year.
