KUALA LUMPUR: The near-term outlook of the local property sector remains unexciting due to the oversupply concern, according to MIDF Research.
There was lingering property overhang as residential overhang units increased with Johor having the highest overhang units, the firm said.
Condominium and apartment were the largest contributor to overhang units, MIDF Resesarch said in a report today.
"Residential overhang units remain on the high side in tghe first quarter of 2022, which we think would make property market remains competitive and prompt property developers to offer attractive package to attract buyers.
"That may also make property developers unable to fully pass on the rising cost of construction to property buyers and bring margin compression of property developers."
According to data released by National Property Information Centre (NAPIC), residential overhang units increased to 35,592 units in the first quarter from 27,468 units in the same period in 2021.
The increase in overhang units could be attributed to the disruption to economic activity from several lockdowns in Malaysia.
Meanwhile, the increase in residential overhang units implies lingering concern of oversupply in the property market.
Nevertheless, MIDF Research said the situation showed sign of easing on sequential basis as it eased marginally to 35,592 units in the first quarter from 36,863 units in the fouirth quarter of 2021.
This was following the reopening of economic activity as Malaysia is transitioning to endemic phase.
"In a nutshell, we see that issue of oversupply in property market remains as residential overhang units remain high in the first quarter of 2022, staying above 30,000 units."
MIDF Research maintained its neutral view on the property sector and made "Buy" calls for Mah Sing Group Bhd and IOI Properties Group BHd.
"We like Mah Sing for its strategy of focusing on affordable home segment. Mah Sing could benefit from i-MILIKI as Mah Sing is focusing on selling properties priced within affordable price range and below RM500,000.
"We are also positive on IOI Properties Group due to its undemanding valuation of trading at 73 per cent to its net tangible asset per share of RM3.60. We see earnings outlook of IOI Properties Group to underpin by higher contribution from property investment and leisure and hospitality divisions following reopening of Malaysia's economic activity," MIDF Research.