DOUBTLESSLY, many property developers have seen their projects been adversely impacted by the various phases of the movement control order (MCO) to contain the spread of the COVID-19 pandemic.
The key challenge of developers during this MCO period was to meet expenses without cash flows from progress billings.
On a brighter note, as revealed by the Real Estate and Housing Developers’ Association (REHDA) Malaysia president Datuk Soam Heng Choon to TA Securities Research, the supply chain is getting back to normalcy while construction works have recovered to 75-85% of pre-MCO levels.
On such note, Soam opined that the property sector will have a slight buffer compared with other industries (ie the airline and tourism industry) as property developers have unbilled sales which could cushion the near-term impact of the disease.
Opinion aside, TA Securities Research also lauded Soam’s call to overcome the lingering oversupply and affordability issues.
“First, the establishment of centralised database and housing development board need to be expedited,” wrote Thiam Chiann Wen in a property sector update following a webinar session with Soam.
“Specifically, the centralised database which would promote greater transparency among stakeholders to share information and data could help to ensure new housing supply is tailored towards the income and demographic profile of households across different locations.”
While sector headwinds persist, the research house concurs with Soam’s views that the prolonged low interest rate environment, abundant market liquidity, and supportive government measures will help to spur demand for properties.
“At this juncture, we are keeping our ‘neutral’ stance on property sector,” noted Thiam. “We are in the midst of reviewing our earnings and stock recommendations, pending more updates and guidance from developers in their upcoming 3Q FY2020 results.”
Taking a cue from the sector’s bellwether, i.e. SP Setia’s 3Q FY2020 property sales which had more than tripled from a quarter ago, TA Securities Research expects the property sector’s third quarter property sales to likely pan out stronger-than-expected.
“In anticipation of an uptick in property sales in 2H FY2020 which might eventually sustain into 2021, we would likely relook into our valuation basis with an upward bias in our upcoming annual strategy 2021 report,” added the research house. – Nov 17, 2020
