Making good progress


PETALING JAYA: The property sector has reported improving business operations and construction progress, as the lockdown eases and vaccination rate among workers in the sector continue to rise.

According to the latest updates from developers, property construction activities have now resumed with a 60% workforce limitation of pre-pandemic capacity.

The sector’s operations are expected to continue improving, supported by the companies’ rising vaccination rates.

It is noted that at least 80% of the sector’s employees have been vaccinated with a single dose, and 10% have completed their vaccination.

Reiterating its “neutral” stance, AmInvestment Bank Research says it remains cautiously optimistic on the prospects of the property sector for the six months to December 2021.

While the sector had reported a healthy performance for the first half of the year (H1’21), the brokerage noted the recovery in H2’21 could be weighed by disruptions caused by the national lockdown, cautious bank lending and soft consumer sentiment.

In its report, AmInvestment Bank Research explained that property sector could see a slowdown in recovery in H2’21, as the tighter Covid-19 containment measures, which took effect in June, have led to closure of sales galleries and halted property construction activities, which delayed the recognition of progress billings.

In addition, it noted, banks remained cautious in residential property lending, as reflected in the low approval rate of 36% from year-to-date to July, compared with 51%–53% during the 2011–2014 uptrend.

<a href='/business/marketwatch/stocks/?qcounter=IOIPG' target='_blank'>IOI Properties</a><a href='' target='_blank'><img class='go-chart' src='' /></a>IOI Properties

The outlook is also dampened by persistently subdued consumer sentiment and employment prospects against a backdrop of the prolonged pandemic.

These, AmInvestment Bank Research said, are restraining consumers from committing to the purchase of big-ticket items, particularly, a house.

Despite the lockdown in June, most property companies in Malaysia saw robust sales momentum in H1’21, the brokerage noted.

“New sales achieved in H1’21 rose substantially by 2.3 times year-on-year (y-o-y) to RM8.6bil from a low base in H1’20,” it said.

As at end-June, most companies have attained 50% to 75% of their sales targets for the financial year 2021 (FY21) ending Dec 31, versus 13% to 51% in the previous year.

IOI Properties Group Bhd, whose FY21 ended on June 30, on the other hand, had exceeded its full-year sales target.

“Despite the lockdown in June, quarter-on-quarter sales were still sustainable, thanks to the ongoing home ownership campaign, which accounted for more than 48% of local sales; digital marketing initiatives; and successful new launches,” AmInvestment Bank Research said.

Meanwhile, the research house said, the stricter Malaysia My Second Home (MM2H) programme could dampen foreign interest in local properties.

Suspended in August 2020, the programme is set to resume in October 2021, with stricter terms and conditions, particularly in terms of financial requirements.

“In line with most of industry experts’ views, we reckon this to be negative for the sector given that the financial thresholds have surged by more than 200% for applicants who are below and above 50 years old.

“Nevertheless, as foreigners are only allowed to purchase properties with selling prices of over RM1mil in most cases, we expect a slight impact to sales as the contribution from foreign buyers to the developers under our coverage was minimal at only 1% to 5% during the pandemic versus 10% before the pandemic,” it said.

AmInvestment Bank research's top pick for the sector is <a href='/business/marketwatch/stocks/?qcounter=SUNWAY' target='_blank'>Sunway Bhd</a><a href='' target='_blank'><img class='go-chart' src='' /></a>, on which it has a fair value of RM2.20. (File pic shows the iconic Sunway pyramid lion.)AmInvestment Bank research's top pick for the sector is Sunway Bhd, on which it has a fair value of RM2.20. (File pic shows the iconic Sunway pyramid lion.)

The research house’s top pick for the sector is Sunway Bhd, on which it has a fair value of RM2.20.

It likes the group for it’s strong brand recognition established by its “highly successful landmark developments and expanding healthcare business, supported by substantive unbilled sales and outstanding order book.”

Relatively more optimistic on the entire property sector, TA Research maintained an “overweight” call on the property sector.

The brokerage explained in its report last week it expected the prolonged low interest rate environment, abundant market liquidity, and supportive government measures would help to spur demand for properties. “We expect better market sentiment, along with more robust recovery in economic and business activities, to contribute to better developers’ sales prospects ahead and eventually translate to stronger earnings,” it said.

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