KUALA LUMPUR – Malaysia’s property sector’s call remains neutral amid escalating risks, said Maybank Investment Bank (Maybank IB).
In a recent research note, Maybank IB explained that the risks dampening the property sector include sluggish sales as a result of the hiking interest rate, new property launch delays, and also the increasing costs of raw materials.
Additionally, it is also anticipating that buying sentiment on costly items will be impacted by the political uncertainties ahead of the general election.
“Further interest rate increases will affect buyers’ affordability and also highly-geared property developers,” the note said.
The property sector’s weak recovery could be a result of the labour and raw material shortages that caused sales and earnings risks such as slower work progress, greater operating expenses, and the potential Liquidated Ascertained Damages (LAD) payments.
In order to ensure the projects are completed on schedule, the property developers may delay some of their newer launches to avoid the possible LAD payments in lieu of labour shortages, added Maybank IB.
The note also mentions that further interest rate increases will have a negative impact not only buyers, but also the highly geared property developers like UEM Sunrise Bhd, while political uncertainties preceding general elections would typically negatively impact the purchase of big-ticket items.
These margin-surpressing headwinds are likely to persist through 2023, it added.
With the Home Ownership Campagin (HOC) is over, the sales for residential property in the first quarter of this year had seen a decline of 6% quarter-on-quarter to RM23 billion, compared to the RM24.6 billion recorded in the fourth quarter of 2021.
“In our view, while the HOC was able to improve buyers’ sentiment for properties, the strict control on housing supplies such as the housing approvals and plot ratio, and the accurate and timely housing data for better housing planning as well as launches are just as important to solve Malaysia’s persistent property overhang issue,” it added.
The note also said that complications may arise as the land is also a state matter and that state governments can legislate on these matters. This is why proper coordination between both federal and state governments are crucial for resolving overhang issues.
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