CIMB: Malaysia's move to freeze luxury property project approval 'positive'

KUALA LUMPUR (Nov 20): CIMB Investment Bank Bhd said Malaysia's move to freeze approvals for development of shopping complexes, offices, serviced apartments and luxury condominiums priced over RM1 million here, will address the oversupply situation in the country's property market.

CIMB analyst Ngo Siew Teng wrote this in a note today, in response to EdgeProp.my's report on Saturday. 

EdgeProp.my had reported that the Cabinet had directed Dewan Bandaraya Kuala Lumpur (DBKL) to freeze approvals for four types of developments, following a study by Bank Negara Malaysia that raised the alarm on a glut in these buildings.

* Cabinet orders DBKL to halt approvals for four types of developments

Based on a document sighted by EdgeProp.my, it was reported that DBKL was instructed to cease considering and approving the development of shopping complexes, offices, serviced apartments and luxury condominiums priced over RM1 million in Kuala Lumpur, effective Nov 1. Existing applications — including variations made to building plans that have received development orders — must receive planning permission by January 2018. 

Today, Ngo said: “If the jurisdiction is only Kuala Lumpur, we expect this to mostly impact the high-end property developers, such as Selangor Properties. However, we are of the view that this will have minimal impact on our top picks such as LBS Bina and Mah Sing, as most of their products are less than RM600,000 per unit and both have limited exposure in offices and retail space."

"However, if the moratorium is applicable nationwide, developers across the board could be affected. There might be some impact on E&O’s developments in Penang and UEM Sunrise’s projects in Johor. If the situation is prolonged, developers might have to revamp their projects or pricing strategy, potentially leading to weaker sales and earnings," Ngo said. — theedgemarkets.com

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