De­vel­op­ers with un­sold units still build­ing houses

RHB Re­search says prop­erty in­ven­tory level is wors­en­ing

The Star Malaysia - StarBiz - - News -

PETALING JAYA: The level of un­sold prop­erty in­ven­tory is con­tin­u­ing to worsen de­spite the fact that de­vel­op­ers have been ag­gres­sively un­wind­ing their un­sold units over the past two years.

RHB Re­search in a re­port yes­ter­day said a num­ber of de­vel­op­ers have still launched var­i­ous new pro­jects to boost prop­erty sales de­spite hold­ing slow-mov­ing in­ven­tory and ex­ist­ing pro­jects.

“Based on the lat­est fi­nan­cial data, un­sold and on­go­ing pro­jects and rev­enue, as well as un­sold and on­go­ing pro­jects and sales tar­get ra­tios for many com­pa­nies have wors­ened, as prop­erty sales and billings from newer or on­go­ing pro­jects have been slow, while older pro­jects with low take-up rates are be­ing com­pleted.”

For some de­vel­op­ers such as Sime Darby Prop­erty Bhd, IOI Prop­er­ties Group Bhd and UEM Sun­rise Bhd, RHB Re­search said un­sold and on­go­ing pro­jects are much higher at twoto-three times of their an­nual turnover.

“Hav­ing said that, over­seas pro­jects may have par­tially con­trib­uted to the amount of un­sold and on­go­ing pro­jects, as rev­enue is only recog­nised upon com­ple­tion of the de­vel­op­ments.”

Based on checks, the re­search house said a num­ber of de­vel­op­ers have cited that their un­sold in­ven­tory is largely con­cen­trated in Iskan­dar Malaysia, due to weak de­mand and slow re­lease of bu­mipu­tra units.

“Ac­cord­ing to the Real Es­tate & Hous­ing De­vel­op­ers’ As­so­ci­a­tion’s sur­vey in the first half of 2018, the glut is mainly in the high-end seg­ments such as de­tached and semi-de­tached units, as well as the high-rise seg­ment in Jo­hor.

“Af­fected ar­eas in the Greater Klang Val­ley are Pu­chong, Shah Alam and Serem­ban.”

With slow-mov­ing prop­erty sales and di­min­ish­ing prospects of prop­erty price growth, RHB Re­search be­lieves some de­vel­op­ers may start to in­cur im­pair­ment charges on un­sold in­ven­tory, par­tic­u­larly for com­pa­nies that have high ex­po­sure and have al­ready launched many pro­jects in Jo­hor.

“For now, we do not think the risk of de­vel­op­ers in­cur­ring im­pair­ment charges will be wide­spread, as prop­erty prices in the Klang Val­ley area are still hold­ing up well.

“How­ever, we are more cau­tious about de­vel­op­ers who had bought their land­bank dur­ing the peak cy­cle in 2012 to 2014, as their land cost, and hence hold­ing cost, would be much higher.

“These de­vel­op­ers will be more ea­ger to ac­cel­er­ate their sales by re­duc­ing sell­ing prices via hefty dis­counts.”

On the out­look for 2019, the re­search house said prop­erty sales are ex­pected to re­main flat in 2019, as many de­vel­op­ers re­main cau­tious amid sub­dued sen­ti­ment lev­els.

Given the slug­gish prop­erty mar­ket out­look, RHB Re­search said most de­vel­op­ers would ei­ther lower or main­tain their sales tar­gets for 2019.

“Apart from the slow pro­jected gross do­mes­tic prod­uct growth for 2018 to 2019F (RHB’s fore­cast is 4.6% for 2018 and 2019) due to the can­cel­la­tion of a few mega in­fra­struc­ture pro­jects, the con­fi­dence level re­mains low, given the volatil­ity in crude oil prices and the ring­git.

“Mean­while, the low vis­i­bil­ity of lo­cal and for­eign di­rect in­vest­ments has not helped to spur mar­ket sen­ti­ment.”

The re­search house said the bulk of prop­erty sales this year is ex­pected to be gen­er­ated from the af­ford­able seg­ment.

This is un­der­pinned by the fact that the gov­ern­ment has an­nounced a stamp duty waiver for the pur­chase of res­i­den­tial prop­er­ties priced below RM500,000 and for first­time pur­chases of homes val­ued at be­tween RM300,000 and RM1mil in the first half of 2019, as part of the Na­tional Home Own­er­ship Cam­paign. Many buy­ers, as a re­sult, held back their pur­chases in the fourth quar­ter of 2018 in or­der to en­joy the in­cen­tives in 2019.”

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