PropertyMarketReport2013_25April2014

8/11/2019 PropertyMarketReport2013_25April2014

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HSR International Realtors Pte LtdEstate Agent Lic. No. L3002226G

www.hsr.com.sg

25 Apr 2014 Volume of transactions fell in 2013, Expect Challenging 2014

Highlights Based on Property Market Report 2013 , the overall volume of transactions dropped

11% YoY to 381,130 in 2013. Volume wise, it is close to the level recorded in 2010.However, overall transaction value grew by 7%, which is the highest level ever (seeValue of Property Transactions chart). The increase in overall transaction value wasdriven by the commercial segment, which grew by 28% YoY, followed by residentialat 6% YoY.

The residential segment is still the key segment, accounting for 65% of total volumeand 47% of the value of transactions in 2013. Last year, demand growth wasstrongest for homes within the price range of RM250,001 to RM500,000, which grewby 35.8% YoY. The demand for homes priced in the RM500,001 to RM1 million rangehas been on an upward trend in the past 11 consecutive years. In 2013, homes in

the RM500,001 to RM1 million price bracket rose by 20% YoY to 22,572 transactions. The number of new launches in 2013 fell by 15% YoY after three consecutive years

of growth. Meanwhile, the national average take-up rate for new launches declinedto 45.1% in 2013 which is the lowest take-up rate since 2009.

In terms of incoming supply, Selangor and Johor are the leading states, accountingfor 21% (149,644 units) and 17% (118,191 units) of total incoming supply in Malaysia(696,557 units).

In 2014, we can expect lower residential transaction volumes and flattish to slightlylower home prices. Historically and rationally, volume falls before home prices.Developers might try to raise or maintain prices but if demand falls and marketconditions persist, ultimately the competition to sell and generate cash flow may leadto subsequent price declines. Huge supply in certain areas such as Iskandar

Malaysia may even have the adverse effect of lowering home prices.

Overall property volume down . According to the Property Market Report 2013 ,overall volume fell 10.9% YoY to 381,130 transactions from 427,520 transactions in2012. The fall in transaction volume was across the board with the commercial segmentdown 16.5% YoY followed by industrial (-15.7% YoY), agricultural (-12.4% YoY),residential (-9.7%) and development land (-6.8% YoY). In terms of market share,residential contributed 64.6% of total volume. Agricultural, commercial, developmentland and industrial accounted for 18.5%, 9%, 5.6% and 2.2% of total volumerespectively.

Source: Valuation and Property Services Department MOF Malaysia, HSR Research

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Malaysia: Number of Property Transactions

Resident ia l Commercial Agricul tural Development Land Industria l Others

Malaysia:PropertyMarketReport2013

http://www.hsr.com.sg/





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25 Apr 2014 Transactions value up, driven by commercial and residential . Transactions valuegrew 6.7% to RM152.4 billion (from RM142.8 billion in 2012). Value of commercialtransactions in 2013 rose strongly by 28% YoY compared to 0.6% in 2012. Othersegments which recorded growth were residential at 6.3% and industrial at 2.7%.However, agricultural and development land registered a decline of 7% and 8.8%respectively. In terms of market share, the residential segment accounted for 47.3% oftotal value. Commercial, development land, agricultural and industrial accounted for23.3%, 12.6%, 8.7% and 8.1% of total value respectively.


Residential segment

Residential transactions by price range . By price range, homes priced atRM250,000 and below accounted for approximately 60% of the total residentialtransactions volume. In 2009, homes within the price bracket of RM250,000 and belowformed 81% of the total market volume. In terms of percentage increase, homes pricedbetween RM250,001 to RM500,000 reported the largest percentage increase at 35.8%.In the past 11 consecutive years, the demand for homes priced in the RM500,001 toRM1 million range has been on an upward trend. Homes in that price bracket increasedby 20% YoY to 22,572 transactions in 2013. Meanwhile, residential units priced aboveRM1 million grew by close to 21% YoY to 9,285 transactions.


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RM millionMalaysia: Value of Property Transactions

Resident ia l Commercial Agricul tu ral Development Land Industrial Others

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RM250,000,9.7%

RM250,001 -RM500,000,

27.3%

RM500,001 - RM1m, 9.2% > RM1m, 3.8%

Transacted Residential Units in 2013 (by Price Range)



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25 Apr 2014 Sales performance of new launches fell . In the primary market, the number of new

launches declined after three consecutive years of growth. In 2013, 48,617 units werelaunched compared with 57,162 units in 2012 (-15% YoY). The national average take-up contracted to 45.1% in 2013 from 47.7% in 2012 as the number of units sold fell by20% YoY to 21,904 units.


Developers’ sales to individuals fell 32% . The number of transactions betweendevelopers and individuals fell 32% YoY to 41,190 in 2013. This we believe was dueto credit- tightening measures by banks. In addition, banks have to use “net sellingprice” (sale & purchase agreement price minus all incentives provided) to determinethe loan-to-value ratio for property financing since 4Q2013.

Higher market activity in Johor YoY . In terms of volume, most states recordeddecline in transactions. However, the number of transactions in Johor grewapproximately 17% to 33,651. In terms of value, Johor recorded the highest growth of63% relative to the other major states. The active residential property market in Johorcould largely be attributed to progress in Iskandar Malaysia and developers launchingmore units there. Johor had the most number of new launches at 10,161 units (+13%YoY).

Incoming supply grew 11% YoY . In terms of incoming supply, Selangor and Johorare the leading states, making up 21% and 17% of total incoming supply in Malaysia in2013. The incoming supply is roughly 15% of the total existing stock in the country ofclose to 4.7 million residential units.

Supply of Residential Units in Malaysia

StateExisting Stock Incoming Supply

2012 2013 %Change 2012 2013 %

ChangeKuala Lumpur 423,043 424,324 0.3% 43,936 52,714 20.0%

Putrajaya 4,708 4,834 2.7% 1,106 1,452 31.3%Labuan 11,737 11,761 0.2% 433 640 47.8%

Selangor 1,339,051 1,358,054 1.4% 135,944 149,644 10.1%Johor 693,527 705,929 1.8% 101,188 118,191 16.8%Penang 365,359 377,942 3.4% 62,028 64,482 4.0%

Perak 398,419 407,185 2.2% 37,373 40,201 7.6%NegeriSembilan

236,058 238,931 1.2% 56,431 59,874 6.1%

Melaka 159,697 162,539 1.8% 18,806 21,636 15.0%Kedah 272,121 276,316 1.5% 40,710 43,794 7.6%

Pahang 220,432 224,400 1.8% 28,116 31,341 11.5%Terengganu 79,161 82,856 4.7% 24,494 24,411 -0.3%

Kelantan 57,414 58,693 2.2% 15,075 17,124 13.6%Perlis 21,566 21,859 1.4% 2,899 3,678 26.9%Sabah 150,304 151,079 0.5% 38,751 43,817 13.1%

Sarawak 207,672 211,832 2.0% 21,365 23,558 10.3%

Malaysia 4,640,269 4,718,534 1.7% 628,655 696,557 10.8%Source: Valuation and Property Services Department MOF Malaysia, HSR Research

Sales Performance of New Launches

Malaysia 2008 2009 2010 2011 2012 2013

Units Launched 48,830 45,909 47,698 49,290 57,162 48,617

Units Sold 21,725 22,055 21,799 22,797 27,264 21,904

Take-up rate (%) 44.5 48.0 45.7 46.3 47.7 45.1



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25 Apr 2014 Unlikely to see double-digit growth in home prices . Malaysia All House Price Index

(MHPI) grew by 10-12% per annum in the past three consecutive years. However, wecan expect flattish to slightly lower home prices in 2014 on the back of lower residentialtransaction volumes. Some have argued that demand will increase ahead of the 6%Goods and Services Tax (GST) to be implemented from 1 April 2015. However, wethink that home prices will not increase significantly as long as the property coolingmeasures stay in place and demand remains subdued. In addition, we believedevelopers can absorb the input tax (GST) as long as the gross margin is still in excessof 20%.

The huge supply in certain areas such as Iskandar Malaysia may even have theadverse effect of bringing down home prices. The “Residential Transactions vs. AllHouse Price Index” char t shows that historically, Malaysia home prices trenddownwards in those years that transactions fall.


Penny Yaw , CFA; ([email protected]) Data: Chua Wei Nie ([email protected])

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IndexUnitsResidential Transactions vs. All House Price Index

Residential (Volume) MHPI

This report is for informationpurposes and has been preparedby HSR Research based onsources believed to be reliable.

Any opinions or estimates in thisreport are that of HSR Research asof this date and are subject tochange without notice. Thecompany and its directors and staffmay have an interest in theproperties mentioned. Issuance ofthe report by HSR Research is notan offer to sell or a solicitation tobuy the properties covered in thereport and HSR Research shall notbe responsible for anyconsequential loss or damage,whether direct or indirect.

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PropertyMarketReport2013_25April2014