PETALING JAYA: Analysts have turned positive on the property sector due to a number of factors including the pause on interest rate hikes by Bank Negara, easing of foreign labour shortage, reopening of China’s borders and stronger ringgit.
Hong Leong Investment Bank (HLIB) Research, which has an “overweight” call on the property sector, noted that the Bursa Malaysia Property Index had outperformed the FBM KLCI year-to-date with a 7.3% gain compared with the 0.3% slide recorded by the benchmark index.
This was following its underperformance last year with a 8.9% fall compared with the 4.6% dip recorded by the FBM KLCI.
“While we are only one month into the year, several key developments have already taken place.
“The most significant development for the sector was Bank Negara’s decision for a rate hike pause on Jan 19,” the research house said in a note yesterday.
Historically, the overnight policy rate (OPR) hovered around the mean range of between 3% and 3.25% while the current rate stands at 2.75%.
“The rate hike pause is consequential in the sense that it signals a deceleration in the rate hike pace and increased probability that the terminal OPR rate may end at the lower range of 3% instead of 3.25%,” HLIB Research highlighted, adding this should bode well for housing demand.
On foreign labour, the research outfit said the property sector should benefit from the temporary easing of rules on hiring as announced by the Home Ministry earlier this month.
“For developers with sizeable unbilled sales in Malaysia, we may potentially see upside to earnings in 2023 due to the speeding up of site progress and earnings recognition,” it stated.
On China, HLIB Research said IOI Properties Group Bhd (IOIProp) is well positioned to capture the country’s economic recovery in terms of demand for houses.
“Amid concerns among Chinese home buyers about the ability of developers to deliver projects, IOIProp stands out by showcasing actual completed units. As at 1Q23, it has a sizable RM1.26bil worth of completed inventories in China,” HLIB Research said.
The research firm opined that China’s borders reopening may reignite Chinese’s buying interest in Malaysian properties.
“This will likely only benefit the high-end developers, as each state has a minimum price set for foreign buyers,” HLIB Research noted.
As an example, the research outfit said the minimum price threshold for foreign buyers in Kuala Lumpur is RM1mil.
Additionally, HLIB Research said the strengthening of the ringgit augurs well for the sector while providing a boost to consumer sentiment, apart from reducing the prices of imported raw materials.
HLIB Research named Sunway Bhd, OSK Holdings Bhd and IOIProp as its top picks for the sector.