Analysts optimistic market is turning around

High take up rates for some recent property launches could be an early sign that the local property market is bottoming out and is starting to turn around like other regional markets after an 18-month slump, property analysts say.

They pointed to the fact that three project launches over the past month, from suburban mass market to high-end condominium projects, registered superb take-up rates within a week or two of their respective launches. This can be attributed to attractive financial packages by some property developers.

Reflecting the improved market sentiment, residential housing loan approvals recovered 89% to RM6.3bil in April, after touching a low of RM3.3bil in January.

Perhaps the most compelling case was Eastern & Oriental Bhd’s (E&O) much awaited launch – the St Mary serviced apartments in the heart of the Golden Triangle, which recorded a whopping 85% take up rate during its preview launch on June 12.

This type of strong take-up is usually seen for landed properties in prime residential areas and not for high-end condos in KLCC.

While prices started at RM833 per square feet, the bulk of the 169 units offered for its East Tower was sold at above RM1,000 psf.

Property analysts who attended the launch preview say that the studio apartments were snapped up in minutes. “An 85% take up rate is hard to ignore. St Mary’s second tower will be launched six months later, at an estimated 20% higher price,” says a property analyst from Hwang DBS Research.

E&O is not an isolated case.

SP Setia Bhd’s Sky Residence, which is behind the National Heart Institute in Kuala Lumpur, recorded a 100% take up rate for its 220 units of Tower A apartments, selling at an average price of RM680 psf. Tower B has so far recorded a 50% take up rate. These condos too, have yet to be officially launched.

SP Setia’s Setia Walk serviced apartments (RM330 psf) and Setia Vista linked houses (RM600,000) in Shah Alam which were launched early this year have both recorded 70% take up rates.

Island & Peninsular Bhd’s 110 linked houses in Kinrara, Puchong were sold out in three days from its launch date of June 6.

Looking at the data from the Property Market Report 2008 released in May, it was verified that transaction values notched a brisk rate of 14.5% while the number of transactions went up 10%. Less surprising was the decent rise in house prices for most part of the country. Overall house prices appreciated 4.8% in 2008, matching the gain in 2007. Of the big-3 markets, Penang enjoyed the steepest appreciation of 10.4% while the Klang Valley gained 4.5%.

Meanwhile, the first upgrade in the sea of sell calls comes from UBS Research, which says that cheap financing available, low interest rates and a recovering stock market will fuel sentiment and create wealth that can be deployed into property.

“In the property upcycle that is just starting, we forecast residential property transactions in Malaysia to increase 10% to 15% per annum in 2010-2012 to RM59bil by 2012; starting with mass-market housing, then spreading to mid- to up-market landed residential properties and finally to up-market condominiums,” says UBS Research.

It adds that the overhang of completed and unsold properties in key markets of Klang Valley, Johor and Penang have also stabilised.

In value terms, the overhang is 7% of transaction in the Klang Valley, 3% in Penang and 37% in Johor. For the whole of Malaysia, the overhang is 11%.

While many may say that Malaysian property is barely affordable, UBS highlights that the estimated average house price in the Klang Valley was only RM291,477 in 2008.

CIMB head of research Terence Wong has a trading “buy” stance on the property sector for its leverage play on the broader market and bombed-out valuation.

“Although the outlook for the sector remains difficult, the sector held up better than expected in 2008. This increases the odds of a manageable consolidation for the industry in 2009, rather than a steep decline.

“SP Setia remains our preferred play on the sector for its excellent management, size and liquidity. Sector re-rating catalysts include a broad market rebound in the second half and attractive valuations,” he says.

Developers with new products to launch are E&O, SP Setia, DNP Bhd and IJM Land Bhd. - By Tee Lin Say (The Star)