CGS-CIMB Research has reiterated its “neutral” stance on the Malaysian property sector amid the potential interest rate hikes (its economist projecting another two 25 basis points (bp) rate hikes in CY2023F), higher property overhang (+2% year-on-year in 1H CY2022) and escalating construction costs arising from building material and labour shortages.
These factors are further compounded by recent findings by the Real Estate and Housing Developers’ Association (REHDA) said that (i) Peninsular Malaysia’s property developers reported a 26% decline in unit launches and a 5% sales drop in 1H 2022 vs 2H 2021.
Additionally, the market outlook survey which covered 150 respondents further revealed that:
- 48% of developers that it surveyed said they did not plan any launches in 2H 2022 with the top reason being unfavourable market conditions;
- Developers are expected to launch more residential properties within the RM250,001 to RM500,000 range in 2H 2022; and
- 44% of developers are pessimistic about consumers’ purchasing power in 2H22 while 41% are pessimistic for 1H 2023.
Interestingly, REHDA’s survey also mentioned that: (i) first-time homebuyers made up 42% of 1H 2022 property buyers followed by upgraders at 36% (investors only 22%); (ii) 53% of 1H 2022 residential new launches were priced from RM250,001 to RM500,000, while most of the unsold units (29%) were priced at RM500,001 to RM600,000; and (iii) top reasons for unsold units are loan rejections, unreleased Bumiputera lots and high pricing/low demand.
“For property developers under our coverage, we observe that 1H 2022 new property sales were lower circa 2% year-on-year (yoy) mainly due to fewer new launches (-35% yoy),” observed analyst Ngo Siew Teng in a property update.
“However, 1H 2022 new property sales vs 2H 2021 were stronger by 10% following economic re-opening and easing of lockdowns.”
Moving forward, CGS-CIMB Research expects developers under its radar to post aggregated FY2022F new property sales that are around FY2021 level of RM15.2 bil as per the FY2022F new property sales target set by the players.
“Most of the property developers under our coverage are ramping up new launches in 2H 2022 vs 1H 2022, riding on the re-opening of borders/economy and timing of approval from authorities. Nonetheless, new launches could be delayed or cancelled depending on macro headwinds, in our view.”
The research house further noted that it likes Sime Darby Property Bhd and Eco World Development Group Bhd given their experience within the green building space and massive landbank to cater to changes in consumer preferences. – Oct 14, 2022