Developers strive to make the best of a challenging year

WHILE most property developers might be revising their 2020 sales target downwards in light of the business impact of the Covid-19 crisis, they are striving to make the best of this “pandemic year”.

LBS Bina Group Bhd recently announced that it is revising its 2020 property sales target to Rm1bil from Rm1.6bil previously, due to the challenging market environment.

CGS-CIMB in a recent report says the new target is more realistic, compared with what was initially set.

“During the movement control order (MCO) period, LBS Bina managed to secure sales bookings of Rm113mil as at May 3, with digital marketing efforts and marketing campaign #Dudukrumah deals.

“LBS Bina is also adjusting down its new project launches’ gross development value to Rm1.7bil (previously Rm2.3bil) due to softer market conditions, where new launches in Cybersouth and Alam Perdana will be reduced.”

The research house adds that LBS Bina is poised to benefit from the government’s focus on affordable housing, as the majority of its products are priced below RM500,000.

To tackle the rise in Covid-19 infections in the country, the government implemented the MCO on March 18. On May 4, a conditional movement control order (CMCO) was enforced to allow businesses to re-open to help the economy recover. The CMCO has been extended to June 9.

In an announcement yesterday, S P Setia Bhd said it was revising downwards its 2020 sales target to Rm3.8bil from Rm4.55bil previously, which is aligned to present market conditions.

“The Covid-19 pandemic has led to the unprecedented implementation of the MCO, which resulted in most businesses and social activities being severely disrupted. The property industry is not spared, and as a result, the anticipated recovery will not happen so soon.

“Instead, the subdued sentiment is expected to worsen and be prolonged. Some form of contraction is expected, but as the property industry has already been facing strong headwinds for the past few years, the contraction is more likely to be buffered rather than suffer a steep decline.”

The company added that it will have to be prepared for a very different operating landscape post-covid-19.

“The recovery of the property industry will largely depend on the improvement of the broader economy and also the buyers’ sentiment, which for now, remains weak as many are adopting a wait-and-see attitude.”

Kenanga Research in a report yesterday said things are looking up for SP Setia, considering the easing of the MCO which allows for construction progress to resume, as well as expectations of strong earnings deliveries, especially in 2021 from the firm’s Battersea project in the

United Kingdom.

“We maintain our conservative price-to-book valuation method as a gauge to ascertain the trough valuations of property stocks amid the prevailing market downcycle.

“Strong unbilled sales of Rm9.8bil provide two years of earnings visibility, providing a good buffer during this challenging period,” it says.

Meanwhile, Perak-based Taraf Nusantara Sdn Bhd said it is still maintaining its Rm1bil sales target, as the company is primarily focused on developing affordable homes.

Managing director Datuk Jimmy Doh says sales have continued albeit at a slower pace during the MCO, due to various factors such as the unavailability of sales galleries.

“However, we continue to receive enquiries from interested parties and we are confident that we will be able to make our sales target in the next seven months, as we only stopped operations completely for less than t wo months.

“About 80% of our homes within our two ongoing developments, Bandar Baru Setia Awan Perdana and Lagenda Teluk Intan, are landed properties under RM200,000 and most, if not all, our buyers consider their purchases as essential purchases.”

Using weddings as an analogy, Doh is optimistic that the local property market will return eventually.

“Houses are like weddings, you might postpone but that does not mean you are not going to get married,” he enthuses.

A property analyst says it would be a good idea to have another round of the Home Ownership Campaign (HOC) this year to help spur property sales.

“Last year’s HOC was a success and having another one this year would help to boost sales. The added incentives thrown in would attract buyers, many of whom or standing on the sidelines and maintaining a wait-and-see approach until the economy improves.”

To address the overhang problem in the country, the government kicked off the HOC in January last year, which was a six-month initiative that eventually got extended until the year-end.

A number of initiatives were announced during the period to encourage home-ownership, such as the exemption of stamp duties on residential units priced between RM300,000 and Rm1mil.

All the properties at the HOC also came with a minimum 10% discount and stamp-duty waivers on the instrument of transfer and the instrument on loan agreement, as well as additional incentives.

The campaign proved successful, having generated total sales of Rm23.2bil in 2019, surpassing the government’s initial target of Rm17bil.

Kenanga Research says the absence of an HOC, coupled with overall weak sentiment rising from economic uncertainty, would negatively result in lower property sales and new property launches for 2020.

“Houses are like weddings, you might postpone but that does not mean you are not going to get married.” Datuk Jimmy Doh