Property developers with overseas exposure especially in China and Singapore will perform better in the medium term, and those involved in certain segments may outperform in the current market condition, says AmInvestment Bank.
The firm's head of equity research Joshua Ng said in a report today that developers like Sunway Bhd and IOI Properties Group Bhd are well-positioned and their property launches have been generally well-received both locally and overseas.
Sunway Property, the property arm of Sunway Group, announced early this year that it is targeting RM2 billion in property sales and expects more than half of it to come from its international property ventures.
The firm planned to launch RM3.5 billion worth of properties this year, with 70 per cent or RM2.44 billion of those launches taking place in Singapore.
The Singapore projects are Parc Canberra, Ki Residence, and Park Avenue Residences.
Parc Canberra executive condo with a total of 496 units was launched early this year. Despite the on-going Covid-19 pandemic, the project reportedly sold more than 85 per cent of the units.
It was reported that Ki Residence is scheduled to launch this month.
The 660-unit leasehold development is located on the site of the former Brookvale Park, and is a joint venture project between Sunway Developments and Hoi Hup Realty.
Ki Residences' two-bedroom and two-bedroom-plus-study units range from 700 sq ft to 883 sq ft and prices start from S$1.238 million or S$1,769 per square foot (psf).
A typical three-bedroom unit ranges from 861 sq ft to 1,410 sq ft and selling from S$1.428 million or S$1,658 psf.
There are also four-bedroom units ranging from 1,249 sq ft to 1,711 sq ft, priced from S$2.15 million or S$1,707 psf.
In China, Sunway is developing Phase 2 of Sunway Gardens and Tianjin Eco City.
Outlook remains challenging
The research house is maintaining its NEUTRAL view on the property sector as the outlook remains challenging in the next 12 months.
Ng said the firm may upgrade the property sector to OVERWEIGHT if banks ease lending policies on properties, or consumer sentiment is to improve significantly.
It may downgrade its NEUTRAL stance for the property sector to UNDERWEIGHT if banks tighten further their lending policies on properties, or consumer sentiment is to deteriorate further, he said.
Ng expects Bank Negara Malaysia (BNM) to hold its benchmark overnight policy rate (OPR) at 1.75 per cent throughout 2021, in line with the accommodative monetary policy stance expected from key central banks in the world in 2021.
Meanwhile, Ng said that most developers remained cautious, and are still assessing the economic situation before deciding to continue or defer future launches.
He believes that consumer sentiment shall remain weak for the time being with spending mainly focused on necessities while big-ticket items such as properties will take a back seat.
"On a positive side, we expect the reintroduction of Home Ownership Campaign and full stamp duty exemptions on both instruments of transfer and loan agreement for the purchase of property worth up to RM500,000 to generate buying interests," he said.
Ng said the affordable housing segment is expected to perform well, driven by resilient demand, especially from young professionals and families due to continued urbanisation.
This is well reflected by the move by the majority of local property developers to shift their focus to this segment, he said.
"In the past two to three years, many developers have moved from higher-end products to affordable products. Mah Sing, for example, has begun building residential properties under RM600,000 for more than three years.
"Scientex has several projects largely in the southern region of Peninsular Malaysia, offering residential properties comprising landed and high-rise (priced) between RM200,000 and RM350,000. Crest Builder is planning to build residential apartments in Klang with starting prices below RM300,000, scheduled for launch in the first half of 2020," he said.
Ng said, while most developers have achieved their new sales target, the numbers were lower year-on-year (YoY) whereby for the nine months calendar year 2020 (9MCY20) sales were lower by about 22 per cent as compared with the previous year.
"There were lower sales due to the lacklustre market and the impact of the Covid-19 pandemic. Hence, we do not expect to see surprises in earnings over the next 12–18 months. Instead, developers are more aggressive in clearing unsold units by offering discounts with the inventory level on a declining trend. We believe that this is a positive move to realise cash flow," he said.
Land banking to continue
Ng said the firm is expecting some land banking activities to take place, especially for small pockets of land in good locations close to Kuala Lumpur city centre, major expressways and the mass rapid transit (MRT) and light rail transit (LRT) stations.
"We believe high-rise development around these areas provides good connectivity hence convenience for home buyers. For example, Sunway and Mah Sing have embarked on land banking in the past two years, applying such a strategy," he said.
Mah Sing has remaining landbank of around 800 hectares with GDV and unbilled sales totalling RM24.34 billion as at September 30, 2020.
Its founder and group managing director Tan Sri Leong Hoy Kum have said that the group will actively look for strategic land for continuous growth given that its balance sheet remained healthy with cash and bank balances and investment in short-term funds of about RM1.13 billion.
Mah Sing has achieved property sales of RM847.1 million for the nine months ended September 30, 2020, or 77 per cent of its 2020 sales target of RM1.1 billion, despite the challenging business and operating conditions following the impact of Covid-19.
The group told Bursa Malaysia last month that it remained on track to achieve its RM1.1 billion sales target this year underpinned by several new launches lined up before the end of this year.