The research house said that it sees heightened prospect of a stagflation in the sector due to the Russia-Ukraine conflict which has driven up commodity prices amid supply chain disruptions
AmInvestment Bank Research (AmResearch) on Tuesday maintained its ‘neutral’ call on the property sector as it sees gradual recovery in the segment with risk of stagflation.
The research house said in a note that it sees heightened prospect of a stagflation in the sector due to the Russia-Ukraine conflict which has driven up global commodity prices amid prolonged supply chain disruptions.
This could depress housing demand while raising construction costs and compress development profit margins, it said.
The research house also said its cautious view is also due to banks remaining cautious in residential property lending as reflected in the low loans applied/approved ratio of 35% compared to 51%-53% during the 2011-2014 uptrend cycle.
However, AmResearch said there are several encouraging signs from developers under its coverage last year that include ambitious landbanking activities in prime areas with good public infrastructure and connectivity to the Kuala Lumpur city centre; and the exemption of real property gains tax (RPGT) for house sales starting from the sixth year of purchase (previously taxed at 5%) under Budget 2022.
It also said the 4QFY21 performance of seven companies under its coverage was mixed as two were in line with its forecasts, three underperformed and two outperformed.
Except for UEM Sunrise Bhd, it said most of the developers’ FY21 results returned to the black, registering improvement in their bottom lines following the easing of containment measures under the National Recovery Plan in 4Q2021.
Thanks to the Home Ownership Campaign (HOC), digital marketing initiatives and new launches, AmResearch said developers under its coverage registered a commendable 37% year-on-year growth in new sales.
For FY22, it said most developers are setting conservative sales targets (lower than FY21 actual sales), likely due to the expiration of the HOC.
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