Further, the inflation upcycle will not likely translate to substantial demand and earnings growth due to the sharp increase in building materials costs that started in 2Q21.
"Many commodities such as crude oil, steel, copper and aluminium are seeing significant price hikes.
"As economic growth has just started to recover and given the continued oversupply condition, we do not think the developers will be able to pass on the additional building costs via higher property selling prices," said the research firm.
In addition to lacklustre demand and rising costs, RHB noted that Budget 2022 did not include any plans to attract new domestic and foreign direct investments, nor new economic corridors to restart the economic engine.
"There was also no mention of any new mega infrastructure projects, and only a brief mention of the MRT 3 project.
"The property sector will probably have to continue tapping on the current ongoing infrastructure projects to spearhead the recovery," it said.
Meanwhile, RHB expects the next general election to be called soon, which has showed to create lacklustre demand for property stocks six months prior to nationwide polls due to the uncertaint outlook post-election.
RHB estimates 2021 sales growth to be about 70% compared to a contraction of 16.4% year-on-year (y-o-y) in 2020.
For 2022, it projects 10-15% y-o-y sales growth given the higher base in 2021.
Its top pick is Matrix Concepts with a target price of RM2.47.