Property sector rebounds in first half as sales pick up

PETALING JAYA: Most property developers in the country saw a pick-up in sales in the first half of 2022, mainly due to the reopening of the economy.

Kenanga Research said in a report yesterday that most companies met their expectations in terms of first half sales, as home buyers could physically visit sales galleries once more with the easing of movement restrictions.

The research house added that companies such as Malaysian Resources Corp Bhd (MRCB) and Sime Darby Property Bhd even beat its assumptions.

“MRCB beat expectations upon launching its Vivo 9 Seputeh completed commercial units, while Sime Darby Property beat its forecast on launching the right products at the right price within their matured townships.

“This was coupled with the efficient use of various marketing initiatives to reach target markets.”

Nevertheless, Kenanga Research said new launches so far this year have been “trailing.”

“Year-to-date, most developers are still trailing their full-year targets for new launches, we believe, as the high construction costs put at risk the viability of the launches, more so on labour shortages and a rising interest rate environment that erodes housing affordability.

“We take comfort that the cost of certain inputs, such as steel, has been easing over the last couple of months.”

For now, Kenanga Research is maintaining a “neutral” outlook on the local property sector.

“The outlook for the sector will continue to be clouded by oversupply and labour shortages, while housing affordability is being eroded on the back of rising interest rates and soaring construction costs.

“On one hand, share prices of property companies could have found their bottoms (as most of them only trade at a fraction of their revalued net asset value.”

On the other hand, Kenanga Research said there is no re-rating catalyst in sight.

“Under this highly challenging environment, we picked developers with strong cash flow that could anchor good dividends, namely, Eco World Development Group Bhd (Ecoworld) and IOI Properties Group Bhd.

“We also like Ecoworld for its strong brand and IOI Properties for the hidden value in its prime investment properties in the Klang Valley, Singapore and China, which could potentially be unlocked via a real estate investment trust.”

Meanwhile, MIDF Research, in a report last month, also had a “neutral” outlook for the property sector.

“We see the near-term outlook for the property sector remaining unexciting due to the oversupply concern,” it said.

“Residential overhang units remained on the high side in the first quarter of 2022, which we think would make the property market competitive and prompt property developers to offer attractive packages to attract buyers.”