Malaysian policymakers and the public would do well to closely monitor developments in house prices. Not only because housing is easily the single largest investment anyone can make and any changes will affect a household’s balance sheets, but also because it has become an investment vehicle that could deliver capital gains far greater than earnings from work or other investments in the real economy.
While the pandemic-induced recession of the past two years has badly affected the global economy across the board, house prices have been surging due to increasing demands shored up by ultra-low interest rates, government stimulus, savings accrued during lockdowns, shortage in housing supply and changing lifestyles. According to the Knight Frank Global House Price Index, the proportion of housing markets witnessing annual price growth in excess of 10% sits at 48.2% in Q3 2021, compared to only 10.7% in Q1 2020 at the onset of the pandemic. (Figure 1).
Figure 1: Proportion of countries/territories by annual price growth. Source: Knight Frank Research
Looking ahead, this global surge in house prices is expected to continue well into 2022 due to new variants permitting, higher inflations and pent-up demand from home buyers and investors. Also, the surge is expected to be fueled by rising construction costs as a result of building materials and construction labour supply chain issues.
Soaring prices of commodities such as cement, iron ore, aluminum and copper are an unstoppable global phenomenon and people are concerned about another round of house prices boom in the near future.
The housing market in Malaysia is likely to be affected by the rising construction costs as well, as there has been a lot of fluctuation in building material prices due to uncertainty in the supply chain for the past 12 months. According to the Real Estate and Housing Developers Association (REHDA), if the cost of construction continues to rise and builders can no longer absorb the increased costs, it will likely be passed to end-users. Since the cost of construction materials accounts for 50% to 60% of the total development value of a project, a 20% increase in construction cost will lead to a 10% rise in house prices.
Certainly, this has caused a great deal of concern over housing affordability for the people. Given that today’s households are buckling under the strains of COVID-19 due to the impact of the Omicron variant and a higher living cost that has reduced their disposable incomes, housing affordability has never been more challenging. With house prices significantly decoupling from household incomes, the government has pledged to increase the supply of affordable houses.
Malaysia house prices grew 0.7% YoY in Sep 2022, following an increase of 2.6% YoY in the previous quarter. YoY growth data is updated quarterly, available from Mar 2000 to Sep 2022, with an average growth rate of 4.7%. In the long-term, the Malaysia House Price Index YoY Change is projected to trend around 3.50 percent in 2022, according to econometric models. The selling prices of residential properties in the country are expected to increase by 5% to 20% soon.
As a result, all property developers have reported increased profit in the last 4 quarters as shown below:
The list below is the comparison of the top 12 property developers in Malaysia.
KSL is the cheapest in term of PE ratio and Tropicana is the worst. KSL is selling at Rm 1.10 and at PE 3.5. Its NTA is Rm 3.44.
KSL Holdings Bhd is a holding company. It is engaged in real estate services. The company has four reportable segments Property development; Property investment; Investment holding and Car park operation. Property development includes the development of residential and commercial properties; Property investment includes an investment of real properties and hotel; Investment holding includes the provision of management services to the subsidiaries, and Car park operation includes car park management services. KSL derives most of its revenue from Property development.
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IJM2024-08-24
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SPSETIACreated by Koon Yew Yin | Aug 19, 2024
On 14th Aug 2024, I posted my article “Why people are rioting across UK”. Now I want to tell you why do people riot?
Created by Koon Yew Yin | Aug 19, 2024
If I knew politicians are so well paid, I should have been a politician. A few days ago, one old friend who migrated to Australia about 40 years ago, visited me. He told me that he was a Member of P..
Created by Koon Yew Yin | Aug 14, 2024
Riots have spread across numerous cities and towns in England, and in Belfast in Northern Ireland, over the last week in the worst outbreak of civil disorder in Britain for 13 years. Police have ma...
Created by Koon Yew Yin | Jul 30, 2024
The new poll, conducted between July 22-24 and released Sunday, found that Harris’s approval rating had surpassed Trump’s in Wisconsin, Pennsylvania, Minnesota, and Michigan. In Michigan, Harris was..
Created by Koon Yew Yin | Jul 30, 2024
As you can see below, a few people are using my name to promote sale of Initial Public Offer (IPO) shares before and after listing on Bursa Malaysia. You should not buy IPO shares because statistics..
Created by Koon Yew Yin | Jul 23, 2024
The most important criteria for share selection are technical analysis and financial analysis. The price chart below shows that KSL's share price has been going up from 88 sen to above RM 2.13...
Created by Koon Yew Yin | Jul 22, 2024
Recently one smart accountant pointed out to me that KP Property has millions of Redeemable Convertible Preference Shares (RCPS). This will affect its share price. I sold all my KPP shares to buy KSL.
Created by Koon Yew Yin | Jul 15, 2024
Currently Bahasa Melayu is taught in all Government sponsored schools. Bahasa Melayu is only good within Malaysia. All our overseas customers do not know Bahasa Melayu. I hope all our politicians...
Created by Koon Yew Yin | Jul 09, 2024
How can one accurately assess the financial standing of Gamuda and IJM, companies primarily engaged in the construction industry rather than the property sector? https://connectionspuzzle.com
2023-10-30 12:59
What a quaint eyed fool....the Housing Ministry just released their Data with the figures of Completed but Unsold units in hundreds of thousands worth RM12.8 Billions.........
2023-11-16 13:47
Completed but Unsold units in hundreds of thousands worth RM12.8 Billions
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its about location
2023-11-16 15:23
Don't be silly, you expect to get a condo next to BB for the same price at Kuala Kangsar????
2023-11-16 15:29
At the right location 2 million ringgit bungalows are still being sold out
2023-11-16 15:47
Yeah so???....we are talking about completed and unsold units, which Developers could not get rid of. And someone is saying about prices going up and another is saying mismatch of supply and demand..............you want to have the whole cake and eat it all by yourself????
2023-11-16 15:53
speakup
how can u count Gamuda & Ijm whose main biz is construction, not property?
2023-09-20 07:39