AmInvestment Bank cautious property sector on prolonged pandemic

Kuala Lumpur: AmInvestment Bank has taken a cautious stance on the property sector and reiterated its “neutral” call on the sector against the backdrop of the prolonged Covid-19 pandemic.

In a research note Monday, the investment bank said the sector saw a slower recovery in the second half of 2021 (2H2021) as the tighter containment measures from June onwards led to the closure of sales galleries and halted property construction activities, delaying the recognition of progress billings.

Meanwhile, it noted that banks remained cautious in terms of residential property lending, reflected in the low approval rate of 36 per cent compared to 51 per cent–53 per cent during the 2011–2014 uptrend.

AmInvestment Bank said persistently subdued consumer sentiments and employment prospects against a backdrop of the prolonged pandemic are restraining consumers from committing to the purchase of big-ticket items, especially a house.

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The investment bank said new sales achieved in 1H2021 rose substantially by 2.3x year-on-year to RM8.6 billion due to the low base effect of 1H2020.

“With the exception of the IOI Property Group, which exceeded its full-year financial year 2021 (FY21) sales target, most of the companies attained 50 per cent–75 per cent of their FY21 sales target versus 13 per cent–51 per cent in the previous year.

“Despite a full lockdown in June, quarter-on-quarter sales were still sustainable, thanks to the ongoing Home Ownership Campaign which accounted for more than 48 per cent of local sales, digital marketing initiatives and successful new launches,” said AmInvestment Bank. Based on the latest updates from developers, property construction activities have now resumed, albeit at 60 per cent of pre-pandemic capacity.

“We believe that the improving operations will continue to be supported by the companies’ rising vaccination rates, where at least 80 per cent of their employees have been vaccinated with a single dose and 10 per cent fully vaccinated,” said Aminvestment Bank.

On the Malaysia My Second Home (MM2H) programme, the investment bank reckoned that the stricter terms and conditions – particularly in financial requirements – would be negative for the property sector, given that the financial thresholds have surged by more than 200 per cent for applicants.

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The MM2H programe was suspended in August 2020 and is now set to resume in October 2021 with stricter terms and conditions, particularly in terms of financial requirements. “Nevertheless, as foreigners are only allowed to purchase properties with selling prices of over RM1 million in most cases, we expect a slight impact to sales as the contribution from foreign buyers to the developers under our coverage was minimal at only 1.0 per cent–5.0 per cent during the pandemic versus 10 per cent before the pandemic,” added AmInvestment Bank.

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