SERC: Cautious but positive outlook for property sector in 2018

KUALA LUMPUR (Jan 17): The Socio-Economic Research Centre (SERC) expects the  property market to perform better this year on the back of stronger economic indicators and consumer sentiment. Nevertheless, the near term outlook remains cautious.

“I am cautious about the property market. Looking at the oversupply and incoming supply of commercial and retail properties, I think consolidation will continue,” said SERC executive director Lee Heng Guie.

He added that the overhang in the retail and commercial property segments in particular will “drag the sector down”.

“That is why we support the government’s move to only approve projects in certain locations. It will allow the current market to balance and adjust itself out,” he said at a media briefing on its Quarterly Economy Tracker.

He was referring to the recent move by the government to freeze approvals for the development of luxury residential projects, offices and retail spaces. Still overall, the outlook for the property sector in 2018 looks positive.  

“Looking at the economic indicators and figures last year, all looked good. Overall, businesses have been more prudent.

“However, sentiment headed in the opposite direction,” he said. One possibility for the prevailing negative   sentiment could be because consumers have yet to feel the results of the uptick in the economy. 

“I believe this year we will see improvements and we should have a better year ahead,” he said, adding that the Malaysia House Price index is continuing to see moderate growth.

“It was still growing albeit at a slower pace,” he said.

Meanwhile, he expected the government to continue to encourage the development of affordable homes.

“When it comes to affordable homes, the focus should not be just on the supply but also location. When I looked at the data, even affordable housing has an overhang. It could be the location because some of them are not easy to access, lack public transport and amenities,” he explained.

Moving forward, Lee said banks will continue to adopt a strict lending policy and so rent-to-own schemes should be encouraged for wise home ownership.  “It is something that we have to accept and embrace,” Lee shared. 

On interest rates, he forecasted that there is a chance that Bank Negara Malaysia will announce a 25 basis point rise in the overnight policy rate next week.

“Bank Negara will look at three conditions to decide whether they want to move more than 25 basis points — the condition of both the global and local economy, the sentiment expectation and developments in the US. Looking at the current economic condition, I think we are ready to absorb a small step of 25 basis points and there is a chance that it will happen next week,” he said.

Lee believed Bank Negara’s concern is the disconnect between the improving economic figures and the poor sentiment.

“Export figures are growing, spending is growing and there is no significant sign of a pull back. I believe 25 points will not discourage consumption and investment. Hence, I think the government will consider upping the interest rate,” Lee shared.