PETALING JAYA: The property sector continues to face headwinds, but a bright spot remains in the affordable housing segment.

There is also optimism in the Johor property market where the Special Economic Zone initiative is expected to fuel growth, while the completion of the Johor Baru-Singapore Rapid Transit System in 2026 will see improved public transport connectivity in the state. However, these developments will take time, said Kenanga Research.

The research house noted that there is still an oversupply of properties, although this is trending downward. On the consumer side, escalating living costs due to high household debt and elevated interest rates could weaken consumer sentiment, and hence affect property purchases.

“We maintain our neutral stance. But amid these challenges, there are notable shifts and improvements within the sector, particularly in the reduction of unsold units and the focus on affordability in residential developments,” said the research firm.

Pointing to the National Property Information Centre’s latest data for 2023, Kenanga Research noted a reduction in total unsold units, with the number standing at 121,568 (2022: 142,475 units) concentrated in Kuala Lumpur, Johor and Selangor.

“Notably, 61% of newly launched residential properties are priced below RM500,000, signalling a growing preference for affordable-housing options.

“Meanwhile, developers are adapting to market dynamics, offering a mix of products with a heightened emphasis on affordability to cater to first-time buyers and aligning with shifting consumer preferences that are partially influenced by ongoing economic uncertainty.”

n the banking side, the research house said there has been a gradual rise in overall loan applications, which was possibly fuelled by the influx of affordable home products.

“We think that subsequent approval readings may only range between 40%-45% (being the average over recent years) as inflationary pressures could lead to delinquencies should loan approvals become more lenient,” it added.

It noted that over the last two years, property developers have been seeing a gradual but consistent increase in sales, indicating that the property market “is growing moderately rather than aggressively”.

With the expanding demographic of young people, this suggests a rise in first-time home buyers.

The research house also expects transit-oriented developments that aim to concentrate on jobs, housing and services around public-transportion stations to gain traction, particularly in the Klang Valley, as buyers seek convenient options for commuting.

Within the sector, one of Kenanga’s stock picks is MKH Bhd, which has a focus on providing affordable homes priced below RM500,000 and its transit-oriented developments are expected to continue drawing interest from potential buyers.

Additionally, the group’s nearly net-cash position offers robust flexibility regarding its financing options, said Kenanga Research.