Looking to understand what are the property market conditions in the 1st Half of 2021? What are the things to take note of and how should you plan your investments?
The first half of 2021 has come and gone in the blink of an eye. Vaccination rates are at 60% now, approaching the 70% threshold possibly by Oct 2021. The property market has been in a weakened state due to the oversupply problems in both the housing and commercial markets before the pandemic and the weak economy in general. How has the property market performed in the first half of 2021? Is this the right time to invest in a house or in developer companies? This article seeks to provide very straightforward points to consider and understand for your investing decisions. These are the 4 points that you should take away from the performance of the Malaysian property market in the 1st half of 2021.
The housing and commercial segments have not recovered to levels before the pandemic but are slowly recovering.
Let’s start with the most fundamental data to describe the property sector — the Gross Domestic Product (GDP) performance of the housing and commercial segment. Basically, GDP measures how much value-added property developers are producing for the economy (essentially how much is being constructed on the ground) but you can simply think of them as “profits” being made by them. Housing covers all manner of housing being built from condominiums to bungalows and commercial covers properties such as offices, shop lots, shopping complexes, factories, and other properties not considered a house. In the first half of 2021, both segments have indeed recovered with a growth rate of 8.3% and 3.2% respectively compared to 2020’s growth rate of -17.1% and -17.3%.
However, GDP for both segments has not recovered to levels before the pandemic, registering only RM6.0bn for the housing segment (2H 2019: RM7.9bn) and RM5.8bn for the commercial segment (2H 2019: RM7.3bn). The key takeaway here is that the property sector is recovering but is doing so slowly, and hence you need to time your investments into the property sector properly. This might be the best time as it has shown signs of recovery on the ground, but then again it has not recovered to pre-pandemic levels.
House prices have declined in the 2nd quarter of 2021, after a long period of weak growth, indicating a good time to enter.
That’s it, folks. House prices have officially declined in the 2nd quarter of 2021 after a decade of rising house prices. The Malaysian House Price Index as measured by NAPIC, registered a decline of 1.2%, where house price growth has slowly been coming down since 2013. The first 5 years from 2010 to 2015 saw very strong growth of 9.6% on average per year, before coming down to about an average of 4.1% from 2016 to 2020. Considering that house prices have finally decline now, this might be a good time to enter the property market for cheap opportunities whether in property developer stocks or physical houses. After all, it is rate for house prices to decline as they usually only do so during bad times when less people buy houses.
Property Developer stock prices have somewhat recovered in the 1st half of 2021, but were hit again by the lockdowns later.
The KL Property Index tracks the various property developers in the Malaysian market and shows that the first half performance of property developers was at first optimistic but soon turned slightly worse when Covid-19 cases increased and the lockdown was imminent. The level of 715.6 right now is steady and not as bad as 2020’s performance but does indicate that developer stock prices are not back to pre-pandemic levels of 830.6. There are still investing opportunities here if you think property developers can regain their former glory.
High Performers include Damansara Reatly, Y&G, Enra and low performers include Yong Tai, Naim Indah, Mah Sing.
Share price performances of property developers in the market vary, but high performers include Damansara Realty, Y&G, ENra, Menang, Symphony Life, Ecoworld, Multi Usage, and JKG Land. Low performers include Yong Taii, Naim Indah, Goh Ban Huat, Evein, Mah Sing, Ivory Properties, Eco World International and Grand Hoover. If you are looking for developers that have waded the pandemic well, look no further than the 8 highest performing companies. If you are looking for some undervalued investment, you can try investing in the low 8 performers but be wary that you need to research them well enough to find some hidden value in them.