News: Developers’ earnings to shrink in Q3

Oct 22, 2020

Listed property developers are expected to register lower earnings in the third quarter of 2020, reported The Malaysian Reserve (TMR).

This comes as buyers had been constrained to committing to big-ticket items like properties, following the end of the six-month blanket moratorium on 30 September, said Victor Wan, Head of Research at Inter-Pacific Securities Sdn Bhd.

“A lot of people are taking the opportunities to look at buying properties again due to the Home Ownership Campaign and lower interest rate, but it boils down to the abilities to borrow,” he told TMR.

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“If buyers are not able to get loans, it will be difficult for developers to secure sales.”

Bank Negara Malaysia’s monthly statistics showed that RM9.12 billion loans out of the RM29.91 billion loans applied for residential property acquisitions were approved in July.

Meanwhile, there were RM27.45 billion loans applied for housing purchases in August, of which RM9.85 billion were approved.

“Moving forward, we may see earnings contractions from property players as developers are willing to sell at lower profit margins in order to attract buyers,” said Kenneth Leong, Equity Research Analyst at Malacca Securities Sdn Bhd, as quoted by TMR.

“The move is to ensure sustainable cashflows over the near- to mid-term basis,” he explained.

Wan noted that the huge number of property overhang in Malaysia may also weigh on the cost of developers as inventories.

National Property Information Centre’s (NAPIC) Property Market Status Report revealed that the number and value of overhang residential properties in Malaysia increased by 3.3% and 6.4% to 31,661 units worth RM20.03 billion during the first half of 2020, from the 30,664 units worth RM18.82 billion registered in 2H 2019.

The serviced apartment subsector formed the bulk of commercial property overhang, with a total of 21,683 units worth RM18.64 billion, an increase of 26.5% in volume and 24% in value from the 17,142 units worth RM15.04 billion posted in June to December 2019.

Johor continued to have the highest volume and value in residential overhang at 6,166 units worth RM4.74 billion – which account for 19.5% and 23.7%, respectively, of Malaysia’s total for 1H 2020.

The state also had the highest serviced apartment overhang at 15,986 units worth RM14.67 billion or 73.7% of the total volume and 76.7% of the total value.

 

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Lee Sing Siong
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J A Valley Properties
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