ENTAILING big ticket items, the real estate sector has proven to be one of the most difficult sector to predict in terms of market outlook.

Even as residential property prices in major cities in the UK, US, Singapore, and Taiwan have shown a post-pandemic rebound with value rising by more than 30% year-on-year (yoy), there is no guarantee that such trend will be reflected in Malaysia.

“We have yet to see this happen in the local property market,” noted KAR Research analyst Izzul Hakim Abdul Molob in a property sector update.

“We believe that to create a more vibrant market, the market first needs to be confident in the change of the new government. This may only come with the passage of time with more concrete and stable housing policies in place. This would potentially lead to a capital reflation of the real asset prices.”

Post its 6M 2021 results, KAF Research said all developers under its coverage have maintained their year-end pre-sales target despite the potential slower sales performance in 3Q 2021.

“This is due to implementation of the enhanced movement control order (EMCO) in the month of July 2021,” justified the research house. “This shows that the developers are confident on the buying sentiment approaching year-end.”

In aggregate, developers under KAF Research’s coverage recorded a total sales of RM5.6 bil in 6M 2021. This already made up circa 56% of its year-end pre-sales target of RM10 bil for 2021F.

This is an improvement of RM900 mil or circa 20% from the pre-pandemic level in 6M 2019. Against 6M 2020 low base effect, the sales improved significantly by more than two-fold.

For the companies under its coverage, KAF Research said SP Setia Bhd’s sales improvement (vs pre-pandemic) made up more than 80% of the overall sector sales improvement.

“As we have mentioned in our past several property sector reports, we have expected SP Setia to benefit the most as the property market recovers,” justified the research house. “This is because the group has large quality landbanks that are readily available for monetisation as the market recovers.”

Although KAF Research expects a hiccup in early July-August due to the imposition of total lockdown at nationwide level, it expects 4Q 2021 to be the strongest as developers would likely be more aggressive in their launches in the final quarter.

All-in-all, the research house maintained its “overweight” stance on the property sector on the back of strong demand for residential properties to sustain throughout 2021F in view of:

The current Home Ownership Campaign;
Additional stimulus of stamp duty waiver for properties costing up to RM500,000 (until end-December 2025);
Gradual reopening of the economy; and
A sustained low financing rate environment. – Sept 7, 2021