PETALING JAYA: The property market is expected to remain sluggish in the first half of 2020 despite back-to-back reductions in the overnight policy rate (OPR) as sentiment determines buying decision.
Citing an internal study on the relationship between OPR, business/consumer confidence, applied and approved mortgages as well as property sales growth, Maybank Investment Bank Research (Maybank IB) said business/ consumer confidence indicators have a stronger relationship with property sales correlation than OPR.
“In other words, a cut in OPR does not necessarily lead to a significant increase in property sales in subsequent quarters if business/consumer confidence does not pick up, notwithstanding lower interest rates would help more property purchasers qualify for mortgages by lowering the monthly instalment, ” it said in a report yesterday.
The research house added that a lower interest rate also usually signals a weaker economic outlook ahead.
“Despite the two OPR cuts since January, we expect a sluggish property market to continue in 2020 as the country’s political uncertainty and concerns over the Covid-19 outbreak, as well as rising job cuts and growing concerns over global recession could continue to hurt buying sentiment and pose risks to the fragile recovery in the local property market.”
Maybank IB said sentiment on the property sector is unlikely to improve significantly over the short term.
“The buying sentiment was first hit by the high unsold stocks (121,658 units in the third quarter of 2019) and rising job cuts, then followed by heightened political uncertainty, the Covid-19 outbreak as well as growing concerns over a global recession.
“As a result, potential buyers will likely hold back their purchases, especially on big ticket items, given current uncertain times, hence posing risks to the fragile recovery in the local property market.”
The research house noted that six out of the nine developers under its coverage have announced their 2019 full-year results last month, adding that out of the six, three were in line with expectations.
“These were namely SP Setia Bhd, Sunway Bhd and Tambun Indah Land Bhd. Maybank IB said MAH SING GROUP BHD’s earnings were above expectations, while Sime Darby Property Bhd and UEM SUNRISE BHD were below our core earnings expectations, ” it said.
“Ongoing inventory monetisation and re-pricing exercises continued in those “less saleable” projects and that had led to impairment losses in Mah Sing, Sime Darby Property, Sunway and UEM Sunrise’s earnings last year.”
Sales-wise, Maybank IB said Mah Sing and SP Setia’s 2019 actual sales were within its expectations, while Sime Darby Property, Sunway and Tambun Indah achieved better-than-expected sales thanks to the National Home-ownership Campaign last year, as well as overseas projects.
“From our discussions with developers, we understand that most of their sales were derived from affordable landed products priced below RM1mil. Elsewhere, UEM Sunrise’s 2019 locked-in sales were below our expectations.”
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