Cautious outlook for property in Malaysia for rest of 2011

A
leading analyst has suggested that property in Malaysia is facing an uncertain
time in the remainder of 2011 as the country comes towards the end of a two
year property upturn.  With
property stocks in neighbouring countries being downgraded in the light of
increasingly challenging credit conditions, property in Malaysia could be
facing a period of consolidation over the next few months.

Two year property upturn in Malaysia coming
to an end

Loong
Kok Wen, a senior analyst from the RHB Research Institute believes that
historical patterns point to a cautious 2011.  In her online report she said: “Looking back to the historical
pattern since 2002, a property upcycle normally lasts for two years. Based on
historical data we are currently almost two years into a property upcycle.

“While the physical property market may still remain strong
until the end 2011, we believe the timing now is appropriate to keep a watchful
eye on property stocks as well as the sector outlook, as share prices are
normally priced in six to nine months ahead.”

Asian property
markets downgraded

The analyst believes that a number of concerns about
property in the region may actually reduce demand for property in Malaysia
leading to weaker prices.

She continued: “We believe the weak market sentiment on
property stocks in China, HK and Singapore that spilt over to Malaysia was
based on Standard & Poor’s downgrading China’s property market outlook in
June this year from ‘stable’ to ‘negative’ in view of increasingly challenging
credit conditions….if interest rates rise sharply and undermine liquidity in
the system, property sales and hence developers’ cash flows will be adversely
affected.”

The RHB researcher believes that increased government policy
regarding residential property will result in lower demand for property in
Malaysia in the remaining months of 2011.