Some major developers have started selling land in non-prime locations over past few months, while some are exiting local markets amidst Malaysia’s soft property sector and the uncertainty caused by the upcoming general election this year.
For instance, Sime Darby Property recently revealed that it intends to sell 768.9ha of land in Sabah and Kedah, in a bid to focus on developments in the country’s central region.
Another major real estate developer, UEM Sunrise, also disclosed plans to sell 4,046.86 hectares of land in Johor. Previously, the company sold several sites in Johor’s Iskandar Puteri area and Canada for a total of around RM551 million. This accounted for 19 percent of its RM2.9 billion revenue in FY2017 compared to gross earnings of RM1.84 billion in the prior year.
According to Nawawi Tie Leung Property Consultants Executive Director Brian Koh, developers usually dispose pieces of land in remote locations and those that do not generate earnings when times are bad.
He explained that some developers have bought land outside the central region for future expansions when business was good. “But now, when the sector is not as vibrant, they need to consolidate on a strategic level and reaffirm their respective positions in the main market.”
However, the central region is also suffering from an oversupply of properties, and it’s uncertain if the existing un-occupied units can be absorbed by the market.
Meanwhile, property consultancy MacReal International’s Principal Partner Michael Kong noted that it’s a strategy of developers to focus their resources on sought-after locations at the expense of far-flung areas.
Developers are now trying to minimise their losses after “getting hints from the media and statistics announced by Bank Negara Malaysia (BNM) and the National Property Information Centre (NAPIC) on the present glut,” he explained.
Nevertheless, developers’ recent actions are expected to help the overall economy, particularly their market research and shift towards affordable housing.
“With more market studies, they are trying to understand the supply, demand and dynamics of a location for new launches, rather than continue developing townships outside Kuala Lumpur where demand is less,” noted Kong.
This year, a market recovery is unlikely to occur during the first six months due to the existing cautious sentiment due to the looming 14th General Election.
“I don’t think we will see any quick recovery in 2018. I believe that there would not be any sharp changes in property prices, particularly in the primary market. Things would most probably clear up for either a positive or negative by 2H 2018,” he added.
Image sourced from The Malaysian Reserve