THE residential property market still remains soft but earnings for some developers have been decent, especially in the first half of this year.
Based on the response during property launches, investors are starting to see the light at the end of the tunnel and diversifying their investment portfolios.
Developers have also been able to sell after they tweaked their marketing strategies.
According to the “Real Estate Highlights for First Half of 2017” by Knight Frank Malaysia, the market remained subdued with fewer activities while developers were scaling back on new property launches.
Knight Frank Malaysia managing director Sarkunan Subramaniam said despite the overall subdued market in the first half, the rebound in the economy coupled with the strengthening of the local currency and stable employment market, among other positive developments, offered a ray of hope for recovery in the high-end condominium market.
“Malaysia will remain as an attractive investment destination with its stable property market and relatively low entry prices that continue to offer reasonable returns,” he said.
DEVELOPERS WHICH DID WELL
Last month, several developers listed on Bursa Malaysia reported better earnings compared to previous years or quarters.
Malton Bhd, which is developing the Bukit Jalil City in Kuala Lumpur, registered higher pre-tax profit of RM111.77 million for the year ended June 30 2017, versus RM71.2 million in the previous year.
Its revenue increased by 29.2 per cent to RM817.08 million from RM632.21 million previously, based on Bursa Malaysia filings.
Malton attributed the stellar performance to a significant increase in property turnover, among others.
UEM Sunrise Bhd’s pre-tax profit for the second quarter ended June 30 2017 jumped to RM139.34 million from RM73.27 million a year ago. Revenue was also higher at RM897.79 million compared with RM537.81 million previously.
UEM Sunrise attributed its performance to higher property development revenue from projects such as Aurora Melbourne Central and Conservatory in Australia and Residensi 22 in Kuala Lumpur, as well as sales from other completed properties pursuant to the group’s inventory monetisation initiatives.
Revenue was also derived from the sale of its land in Canada by its unit, UEM Sunrise (Canada) Alderbridge Ltd, for RM371 million.
UEM Sunrise expects its performance to improve, underpinned by the existing unrecognised revenue of RM3.3 billion and the sale of several parcels of land in the remaining months.
Mulpha International Bhd, which develops properties in Malaysia and Australia, returned to the black in the second quarter ended June 30 2017, achieving a pre-tax profit of RM90.24 million versus pre-tax loss of RM22.40 million in the same period last year.
Mulpha said the significant improvement was mainly attributed to an increased share of associate profits by RM74.33 million and higher contribution from all divisions, including property.
Goldis Bhd’s pre-tax profit in the second quarter ended June 30 2017 jumped 45.7 per cent to RM113.83 million, compared with RM78.15 million in the same quarter last year. Its revenue, however, was lower at RM271.39 million compared with RM287.63 million in the same quarter last year.
Goldis expects its 2017 performance to be satisfactory despite a challenging year.
NEW LAUNCHES WITHIN AFFORDABLE
PRICE RANGE
A study by Henry Butcher Malaysia showed that there was an increase in the number of new launches in Kuala Lumpur in the first half of this year compared with the corresponding period last year.
Although this may be taken as a sign that developers have regained their confidence and are anticipating an upturn in the market, further analysis of the data shows that most of these new projects are within the more affordable price range.
For the first half of this year, 15 projects were launched compared with 11 in the same period last year, an increase of four projects.
There were 14,200 units launched in the first half of this year, an increase of 1,000 units compared with the same period last year.
As land cost is higher in Kuala Lumpur and there is a need for the landowners and developers to maximise land and returns, all the new projects launched are those with strata titles.
For the first half of this year, there was a near-even split between condominiums (seven) and serviced apartments (eight), while the first half of last year had a higher percentage of serviced apartments (six) compared with condominiums (four) and small office-type development (one).
The most popular sizes appeared to be between 1,001 and 1,200 sq ft as 13 of the projects offered units of these sizes.
Ten of the projects offered units of between 1,201 and 1,500 sq ft while 11 projects had sizes of between 801 and 1,000 sq ft.
Interestingly, four of the projects offered large-sized units of above 2,000 sq ft compared with only one the year before.
With the current soft market, one would have expected developers to launch fewer of the more expensive large units.
In terms of pricing, 11 of the projects had units priced between RM600,001 and RM800,000, 10 projects had units priced between RM400,001 and RM600,000 and nine offered units priced between RM800,001 and RM1 million.
Eight of the projects came with higher priced units of above RM1 million.
The vast majority of the projects offered units within the range of RM600,001 to RM800,000.
Geographically, there was a minor overlap, with areas like Bangsar South and Kepong seeing launches in these two periods.
Sungai Besi and Wangsa Maju saw two launches each for the first half.
The new projects launched in KL Sentral, Sri Hartamas and Jalan Tun Razak were pricier, ranging from RM900 to RM1,600 per sq ft, whereas projects in Cheras and Jalan Semarak were more affordable at RM300 to RM400 per sq ft.
Based on the research, it looks like the first half of this year is about developers having a narrower focus, appealing to the middle class with more affordable offerings, and supplying and building according to that market sentiment.
A middle-class focus, however, does not mean that developers have overlooked the upmarket offerings. Judging from the data, developers are continuing to create supply for this segment.
Developers will likely maintain this balancing act — ensuring a continuous supply for the working middle class as well as the established affluent populace.