KUALA LUMPUR: Malaysian property developers are expected to face challenges moving their unsold stock in the absence of a home ownership campaign (HOC), according to MacQuarie Research.
Coupled with pandemic uncertainties, Macquarie Research said increasing raw-material costs, potential interest-rate hikes and low affordability, developers might be pressured to maintain sales performance at the expense of margins.
The firm picked Sime Darby Property Bhd as its top sectoral pick and only "Outperform" call in its recently-issued Malaysia Property Sector report.
"We reiterate our Outperform call on Sime Property given the potential for its ongoing strategic refocus to grow recurring income streams and its focus on industrial real estate," it noted,
Macquarie Research said based on Bank Negara Malaysia's January data on loan applications for residential purchases, demand appeared to have started to decline. "We believe the trend will continue throughout 2022."
Macquarie Research said despite its bearish outlook on the sector, opportunities for entry still existed.
With HOC's incentives and attractive offers concluded its three-year run in December 2021, the firm believed this would discourage buying to some extent, especially in the first half of 2022 (1H22).
"Pre-pandemic, the housing industry recorded RM40 billion of sales driven by the HOC, which helped developers significantly trim unsold inventory, comprising 45 per cent residential units."
Macquarie Research revised down its property revenue by seven per cent, five per cent and 29 per cent in the financial years 2022 to 2024.
"With the transfer of our property coverage to Danial Razak, our pecking order is Sime Darby Property Bhd, Eco World Development Group Bhd, the SP Setia Bhd," it added.