Alliance DBS Research believes Malaysia’s property market will require at least another three years to absorb all the unsold properties, assuming there is status quo in historical volume.
“Based on data from the National Property Information Centre (NAPIC), we estimate that Malaysia’s property market will need at least another three years to absorb the unsold properties, assuming status quo in historical transaction volume,” it said in a research note as reported by The Star.
“Therefore, a meaningful recovery for the property market is only expected by 2023.”
It noted the huge and growing property supply overhang is still the key stumbling block for the sector’s recovery, leading to weak sentiment among investors and buyers.
The supply glut will only serve to intensify the competition among developers, as smaller players could adopt an increasingly aggressive pricing to monetise their unsold units.
Alliance DBS Research claims developers will continue to face challenges in replenishing their property sales as they draw down on unbilled sales, indicating low earnings visibility moving forward.
Depressed rental yields may further discourage investors from entering the market, aggravating the already weak sentiment in the country’s property market.
“Property stocks are currently trading at multi-year low at 0.49 price/book value (P/BV) which is two standard deviation below its 10-year mean, pricing in the worst case scenario,” noted Alliance DBS Research.
And while there is a lack of imminent catalysts, the research house favours developers with clear earnings visibility as well as decent dividend yields.
“We like Sunway for its focus on sustainable township developments with multi-disciplinary expertise which has resulted in superior integrated ‘build-own-operate’ model with a proven track record,” it said.
“It is set to resume its growth trajectory with projected FY18-20F earnings compound annual growth rate (CAGR) of 8%, contributed by strong performance across its key divisions in property development, construction, healthcare services and investment property.”
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