The Malaysian property sector is expected to remain resilient this year despite the Government’s various cooling measures.
UBS Securities in its report said the local property sector will be driven by favourable demographics, rising urbanisation, low unemployment, and reasonably low interest rates.
“We believe one of the key drivers of the Malaysian property sector is the relatively young population. Around 34% of the 29 milllion total population fall within the 20 to 40-year-old age group, implying a positive household formation trend.
“We believe individuals in this age band are potential home-buyers, with those in their twenties looking to purchase first homes and those in the thirties and forties likely to upgrade to accommodate larger families, or buy a second home as an investment.”
UBS Securities also said more young people are migrating to larger cities/states such as Kuala Lumpur, Selangor, Penang and Johor.
“In turn, property developers are focusing on the more urbanised states.”
The research firm pointed out that Malaysia’s unemployment levels have been low, with unemployment rates rarely exceeding 4% of the total labour force over the past 16 years.
“The highest point was 4.5% during the financial crisis in 1998. As the broader economy is performing well, with first quarter 2014 gross domestic product (6.2%) coming in ahead of expectations, we expect unemployment levels to remain at the current benign level.
“In line with the low unemployment rates, we have observed a declining trend in mortgages as a percentage of impaired loans. We expect this to help maintain a sustainable level of demand in the property sector.”
UBS Securities added that although home prices have been on a steep upward trajectory over the past few years, affordability levels have, however, remained at reasonable levels.
“Average household incomes are at four to 4.5 times mortgage payments or put differently, mortgage payments represent 22% to 25% of total household income. We believe this has been facilitated by the longer repayment tenures of up to 35 years from 25 years a decade ago.”
The research house has maintained “buy” ratings on Mah Sing Group Bhd and S P Setia Bhd and downgraded UEM Sunrise Bhd from “buy” to “neutral.”
