- New foreign entrants raise fears of a housing glut in Iskandar Malaysia (IM).
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Ability to absorb ample incoming supply of high-rise
condominiums and retail space by end-2015/2016 remains our key
concern.
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Maintain NEUTRAL; we prefer Klang Valley over IM. Top pick is Eco World (BUY; MYR6.59 TP).
What’s New
Findings from our IM site visit last week are rather similar to our visit in Apr 2014. Malaysian developers are scaling back/slowing down on their new launches in IM hotspots i.e. Danga Bay and Nusajaya-Medini and shifting their focus to landed/industrial properties due to rising competition in the high-rise integrated property segment. Guangzhou R&F (GZRF) is still aggressive in property launches while Greenland Group (another new Chinese entrant) is now registering interest for its Jade Palace project in Danga Bay. There may be a few more land sales to foreign developers in IM, from our channel checks.What’s Our View
We remain cautious about the increasingly crowded development space in IM. Oversupply of apartments/retail spaces in hotspots such as the Nusajaya-Medini and Danga Bay areas may cause a decline in property values over the medium term. Johor’s House Price Index (HPI) contracted 1.6% QoQ in 2Q14, the first decline in 27 months on weaker buyer sentiment due to government cooling measures effective from Jan 2014.Geographically, we prefer the Klang Valley over IM. In our view, the strong population growth potential (>+40% by 2020) in the Klang Valley offers more sustainable demand for properties. That said, the JB-Singapore rapid transit system could reignite investors’ interest in IM and IM related stocks.
Source: Maybank Research - 3 Oct 2014
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