Opportunities in a volatile market

THE Malaysian property market has been on a downward slide for the past two years or so. With an uncertain economy and few signs of the property market bouncing back in the near term, are there still opportunities for investors?

Sarena Cheah (pictured, right), Sunway Bhd managing director of the Property Development Division for Malaysia and Singapore, believes that property investments have always proved to be resilient across economic cycles and there will still be pockets of opportunities even in weak market conditions.

“Properties within mature locations that are well served and connected will remain in demand. The completion of new transport infrastructure will add to the excitement of these locations,” says Cheah.

Sarah Lim (pictured, below), Kenanga Investment Bank Bhd head of equity research, takes a more cautious view of the property sector. She notes that fundamental data reveals that it is going through some structural adjustments that may change the traditional property cycle altogether.

“The issues involved extend into the banking system,” says Lim.

She adds that there has been talk that the incoming Bank Negara Malaysia governor will introduce measures to boost the property sector within the first six to nine months of the appointment to revive the market.

The Real Estate and Housing Developers’ Association Malaysia and other property developers have also continued to campaign to bring back the Developers Interest Bearing Scheme for first-time house buyers, says Lim.

“However, it appears that there are a lot of concerns about whether it will affect the banking system’s future asset quality or it will increase the default rate down the road if these loan applicants do not have the right credit standing to start off with.

“There is no easy monetary solution in sight and measures for first-time homebuyers may not impact developers’ sales meaningfully due to the current rebates and easy financing schemes. It may present more future risks for the banking system,” opines Lim.

If other options prove to be too volatile, investors may want to look at investing in real estate investment trusts (REITs), says Axis REIT Managers Bhd CEO and finance director Leong Kit May (pictured, right).

A REIT is a defensive investment option in a volatile market due to its predictability in income distribution and the potential capital appreciation.

“This is because Malaysian REITs are required to distribute at least 90% of their distributable income to enjoy tax exemption on their income,” says Leong.

She adds that investing in REITs also allows investors access to a portfolio of quality real estate while benefiting from a favourable tax regime and a high level of governance.

Cheah, Lim and Leong will discuss these matters at the panel discussion, “Where to put your money — real estate, stocks or REITs?” at The Edge Investment Forum on Real Estate 2016. It will be held at Sunway Putra Hotel in Kuala Lumpur on April 30. The theme of the forum is “Riding out the storm: Pitfalls to avoid”.

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This story first appeared in TheEdgeProperty.com pullout on April 22, 2016, which comes with The Edge Financial Daily every Friday. Download TheEdgeProperty.com here for free.