More convincing recovery seen in second half

RENEWED strategies brought on by the Covid-19 pandemic and improved optimism from the mass vaccination programme have developers projecting stronger sales performances for 2021.

Over the past month, following the announcement of various developers’ 2020 earnings performance, many have projected higher sales targets going into 2021.

A property analyst says local developers have learnt “valuable lessons” in 2020 as a result of business disruptions caused by the pandemic.

“It wasn’t just developers. Everyone was affected by the pandemic. As a result, companies had to make decisions quickly. Employees’ well being and remote working systems were a top priority.

“But regardless of the disruptions, companies had to ensure that business carried on no matter what, so that revenues don’t plummet significantly.”

He adds that many developers still continued to engage with potential buyers even during periods of movement restrictions.

“That’s the advantage of having digital platforms. Developers could carry on promoting, engaging and wooing buyers about their upcoming products.

“In a nutshell, developers reinvented themselves, adapted to new ways of doing business and are going into 2021 stronger, bolder and more optimistic than ever.”

An industry observer points out that 2020 was an unprecedented year for businesses everywhere.

“It was a year that the world had never faced, at least not since the Spanish Flu a century ago.

“Having survived arguably the toughest year in recent history, many developers will remain cautious but they will certainly be going into 2021 with a lot more optimism, after experiencing the worst.

TA Securities in a recent report says it expects developers to chart a better performance in 2021, as the market slowly regains some confidence with the commencement of national immunisation programme, which kicked off last month.

“All in, we believe the prolonged low interest rate environment, abundant market liquidity and supportive government measures would help to spur demand for properties.

“Having said that, we expect better market sentiment along with stronger recovery in economic and business activities should contribute to better developers’ sales prospects ahead and eventually translate to stronger earnings, going forward.”

The research house says positive sales momentum in the fourth quarter of 2020 and developers’ ambitious 2021 sales target have further reinforced its bullish view on the sector.

“We think developers deserve a re-rating, considering their robust future sales growth and attractive valuations. While more convincing recovery is expected in the second half of 2021, we advocate investors to start building positions in property stocks at this time.”

Forbes, in a recent report titled “Four Ways Real Estate Marketing Is Shifting In 2021” notes that the real estate industry has undergone turbulent changes over the past year.

“The pandemic has real estate agencies and investors scrambling to find new solutions to operate effectively and safely. It is a digital game of give and take amid massive relocation and record-low interest rates. The way agents interact with sellers, buyers and renters has shifted dramatically.”

The report points out that now, more than ever, real estate marketing and transactions are moving toward enhanced digital solutions.

“The companies that best adapt now will be the ones set up for success in the years to come. It is possible to gain several years worth of territory and market share compressed into one year or less.

“The key to success is to rapidly pivot parts of your platform to systems that are delivering results.”

Forbes says it is seeing more real estate players today leveraging data, technology, video and social media marketing to drive their promotional campaigns.

On the local front, an analyst says the extension of the Home Ownership Campaign (HOC) will certainly help spur sales for developers.

“The campaign offers various incentives, especially for first-time buyers, who need to purchase property.

The HOC was kicked off in January 2019 to address the overhang problem in the country. The campaign, which was initially intended for six months, was extended for a full year.

The HOC proved successful, having generated sales totalling RM23.2bil in 2019, surpassing the government’s initial target of RM17bil.

The government reintroduced the HOC in June last year under the Short-Term Economic Recovery Plan (Penjana) to boost the property market after it was adversely affected by the Covid-19 pandemic.

TA Securities says most developers have set a higher sales target for 2021.

“Although S P Setia Bhd is targeting a flattish sales growth in 2021, we note the RM3.8bil sales target remains the highest among its peers. To achieve the sales target, we gather that developers remain prudent in their launches and will roll out products catering to market demand.

“In terms of price point, we see developers continuing to focus on affordable housing that is priced at RM500,000 per unit and below.”

An industry observer says the focus on affordable housing makes sense, given the current economic climate.

“There is still much uncertainty in the market and it would make sense for developers to build homes with a low-entry point.”

Noteworthy is the fact that building affordable homes has always been high on the government’s agenda.

Just last month, the Federal Territories Ministry, in collaboration with Putrajaya Corp, announced that it will build a total of 12,253 units of affordable housing under the Residensi Prihatin initiative. Currently in the planning phase, the initiative will involve 10 development projects in Presint 5,7, 11,16 and 19 and is expected to be completed in 2025.

The development would include facilities like a surau, multipurpose mall, kindergarten, nursery, trading spaces, badminton courts, children’s playground and sheltered parking lots.

Additionally, TA Securities says developers generally believe that sentiments and optimism have improved, especially with the nationwide vaccination rollout.

“Specifically, first-quarter 2021 property sales appear unperturbed by the movement control order that was implemented in January, with S P Setia and Sime Darby Property Bhd reportedly securing encouraging bookings of RM1.45bil and RM800,000, respectively.

“We also understand that Mah Sing Group Bhd has raked in about RM250mil sales in the first two months of 2021.”

The research house adds that developers are expected to record encouraging sales growth of 15% in 2021.

“We anticipate the property sector to enter a new cycle of growth from 2021 onwards and project property sales growth to sustain at 10% in 2022.”

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