PROPERTY developers are not expected to stage an earnings surprise in the next 12 months due to the Covid-19 crisis, said AmInvestment Bank.
The research house maintained a neutral view on the sector as most developers were still deliberating whether to continue or defer future launches, despite the easing of the movement control order, AmInvestment analyst Thong Pak Leng said in a July 20 note.
“We believe consumer sentiment remains weak for the time being with spending mainly focused on necessities while big-ticket items such as properties take a back seat,” Thong said.
Moreover, developers might post profits for the financial years 2020 and 2021 due to unbilled sales, but some companies might be highly leveraged, “as it is one of the key factors to their survivability during an economic downturn,” Thong said.
Moving forward, the affordable housing segment would be expected to “perform better,” Thong added, “especially demand from young professionals and families due to continued urbanisation.”
The Penjana stimulus plan was also expected to register a positive, he added.
Under the plan, the Home Ownership Campaign was reintroduced where a stamp duty exemption would be granted for the purchase of residential properties priced between RM300,000 and RM2.5 mil.
It also includes an exemption of real property gain tax (RPGT) for Malaysians on the disposal of residential properties made from June 1, 2020 to Dec 31, 2021.
These are deemed “positive” for developers, said Thong, as “these key measures will improve the overall sentiment of house buyers and the residential property market in Malaysia.”
But Thong maintained a neutral view on the property sector as he did not “anticipate earnings surprise” in the medium term.
“We may upgrade the property sector to overweight if: (1) the banks are to ease lending policies on properties; or (2) consumer sentiment is to improve significantly,” he said. – July 20, 2020
