Logo of Phnom Penh Post newspaper Phnom Penh Post - Malaysian developers switch to affordable housing, bank says



Malaysian developers switch to affordable housing, bank says

Content image - Phnom Penh Post
The property market is starting to see a tapering down in overhang inventory levels, as developers switch to affordable houses.

Malaysian developers switch to affordable housing, bank says

The Malaysian property market is starting to see a tapering down in overhang inventory levels, as developers switch to affordable houses.

AmInvestment Bank said the national residential overhang had tapered down by eight per cent year-on-year to 27,468 unsold units in the first quarter of 2021, translating into 18.5 billion ringgit ($4.36 billion) compared with 18.9 billion in the previous corresponding period.

It said this has been mainly due to developers moving from high-end products to affordable ones.

“We are mindful that affordable housing typically commands low margins which could be crimped further by intensifying competition, as this segment gets more crowded by the day.

“However, we think that companies under our coverage are established to compete, given their savvy management teams and healthy balance sheet, with net gearing ratios of 30 per cent to 59 per cent.”

The research house noted that developers such as Mah Sing Group Bhd and Lagenda Properties Bhd are in a net cash position.

“Hence, they have the ability to secure strategic land banks with a reasonable cost-to-gross development value ratio of between 10 per cent and 20 per cent.

“Year-to-date, Mah Sing and UEM Sunrise have each acquired two landbanks in the Klang Valley while Sunway secured one.”

Separately, AmInvestment Bank said the loan-to-value (LTV) ratio offered by banks has been low.

“Based on Bank Negara’s second half 2020 financial stability review, the average LTV ratio of outstanding housing loans remained below 60 per cent [compared with 59 per cent and 57 per cent in 2018 and 2019 respectively].

“Banks remain prudent in residential property lending to mitigate the risk of more borrowers falling into negative equity and limit the increase in loan loss provisions.”

Even though loans applied for residential properties reached an all-time high in April 2021, reflecting improved consumer sentiment, AmInvestment Bank said the average approval rates of banks slid to only 34.2 per cent from 37.4 per cent a year ago.

“We believe this is likely due to the house buyers’ inability to qualify for a home mortgage given high debt service ratio [DSR] for newly-approved loans at 43 per cent, while the household debt-to-gross domestic product ratio has risen to 93.3 per cent as at December 2020 from 82.9 per cent in December 2019.”

The DSR is calculated by dividing applicants’ debt service obligations by their incomes to assess borrowers’ risk profile.

Most banks observe a cap of 43 per cent for the low-income group and 71 per cent for the middle-to-high income borrowers.

“Potential house buyers may have little room left to take on a home mortgage due to their existing debt service commitments [arising from outstanding study, car or personal loans] while their incomes have not grown sufficiently during the pandemic.

“This was exacerbated by the softer job market as reflected in the still elevated unemployment rate of 4.7 per cent from January to May 2021,” the research house pointed out.

THE STAR (MALAYSIA)/ASIA NEWS NETWORK

MOST VIEWED

  • Typhoon Noru brings flash floods – 16 dead

    An official warned that that the 16th typhoon of the season, Noru, had brought heavy rains to areas the Mekong River and flooded thousands of homes in the provinces bordering Thailand. As of September 27, the death toll from the flooding had risen to 16. National Committee

  • Siem Reap drain canal now ‘mangrove’ promenade

    A more than half a kilometre long stretch of canal in Siem Reap has been covered and turned into a promenade to attract visitors, said Ly Rasmey, secretary of state at the Ministry of Land Management, Urban Planning and Construction, on September 16. The new pedestrianised

  • Angkor wildlife, aquarium park still to open October

    The Angkor Wildlife and Aquarium complex about 30km southeast of Siem Reap town with initial total investment of more than $70 million is reportedly still on track for an end-October opening. The park is located on a 100ha plot along National Road 6 in Kbon village, Khchas

  • Defence minister reaffirms Kingdom’s staunch support for One-China policy

    Minister of National Defence General Tea Banh has reaffirmed Cambodia’s unwavering support for the One-China policy. Tea Banh was speaking at the September 20 ceremonial handover of 117 vehicles and other military equipment donated by China’s defence ministry, held at Phnom Chumreay International Military Training

  • Thai Senate delegates in Cambodia to discuss anti-graft co-op

    A delegation from Thailand's Senate was in Phnom Penh on September 28 to meet their Cambodian counterparts to discuss strategies for fighting corruption and enhancing cooperation. The Thai delegates were from its Senate’s Committee on Studying and Inspecting Corruption, Misconduct and Strengthening Good Governance. They

  • Deaths due to ‘lifestyle’ diseases rise in Kingdom

    The Ministry of Health has called on people to pay closer attention to their health to protect themselves from non-communicable diseases (NCDs) which it said have caused high rates of deaths in the country. Ministry secretary of state York Sambath made the call at a