As an investor and former property developer, I have not looked at property stocks in the last few years because there were so many unsold properties in every town and cities in Malaysia. Supply exceeds demand for properties. However, I must not forget that property sales depend very much on the locations. For examples, KP Property and KSL constructed properties in good locations.

That is why KP Property and KSL have been reporting good profit in the last 2 years and their share prices are shooting up like Russian missiles.

KP Property: Last traded price is 89 sen and EPS for last 4 quarters is 23.7 sen. It is selling at PE 3.7.

KSL: Last traded price is Rm 1.07 and EPS for last 4 quarters is 31 sen. It is selling at PE 3.5.

These 2 stocks are the cheapest among all property stocks.

Home prices are rising:

Property developers expect home prices to increase in 2023 amid the rising cost of doing business in the country, which climbed by an average of 17% during the first half of 2022. Moreover, all building materials and labours costs have been going up due to inflation. 

Meanwhile, MIDF Research noted that loan application statistics for August indicated that demand for real estate continued to be unaffected by the overnight policy rate (OPR) hike.

1) Home prices to increase in 2023 amid rising business cost 

Property developers expect home prices to increase next year amid the rising cost of doing business in the country, which climbed by an average of 17% during the first half of 2022.

“The majority of developers have offered some clues as to how much more expensive their new launches’ selling prices would be. It is not a low amount,” Real Estate and Housing Developers’ Association (REHDA) Malaysia President Datuk NK Tong told the New Straits Times.

REHDA’s Property Industry survey showed that 82% of the respondents had indicated that their cash flow had been impacted by the rising business cost.

The main cost factors affecting cash flow in 1H 2022 are land costs, labour expenses, compliance costs and longer approval times.

Looking ahead, the respondents expect construction expenses to increase by an average of 18% in 2H 2022 and beyond, which could in turn affect home prices.

2) Property loan applications up in August despite OPR hike

Loan application statistics for August indicated that demand for real estate continued to be unaffected by the overnight policy rate (OPR) hike, said MIDF Research.

The firm was referring to Bank Negara Malaysia (BNM) data which showed that the total loan amount applied for the acquisition of real estate grew 4.5% month-on-month to RM53.4 billion in August, reported the New Straits Times.

On an annual basis, the number of property loan applications rose 66.1% due to a lower base impact brought about by the lockdown in August 2021. 

The total loan amount approved for the purchase of property climbed 2.4% month-on-month and 93% year-on-year to RM23.3 billion in August.

“Overall, the higher approved loans are in line with our expectation of marginal recovery in new property sales for property developers. We also see a loan for the purchase of property in August 2022 to be in line with our expectation of marginal recovery for the sector,” said MIDF Research.

“Nevertheless, we maintain our ‘neutral’ call on the property sector as residential overhang remains elevated in the second quarter of the calendar year 2022,” it added.