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Research house sees intense competition in affordable housing sector

Source from : The Star, Original Article


PETALING JAYA: The intense competition for affordable housing is expected to continue as home ownership for the B40 group remains the government’s top agenda.

AllianceDBS Research said in a report yesterday that it anticipates stricter government enforcement on future approvals for new property developments.

“Increasing cost burden is expected to persist for developers, which will pressure their profit margins.”

The outlook comes following the launch of the National Housing Policy 2.0 on Monday, which outlined measures to improve home ownership among the low-income group, namely the B40.

B40 refers to the bottom 40% of households with monthly income of RM3,900 and below.

The government plans to build one million units of affordable homes for the B40 group within the next 10 years, with the aim of providing 100,000 units each year continuously.

CGS CIMB, meanwhile, believes developers may miss their new property sales targets for 2018 and are likely to set lower new sales targets for 2019.

“We think this would signal that the 2019 property market is likely to see lower new property sales and weaker buying sentiment. Sime Darby Property remains our top pick as we believe the group’s healthy balance sheet and massive land bank give it an advantage in addressing the change in future product demand.”

AmInvestment Bank Research noted that several programmes and policies under the National Housing Policy will take a holistic approach in handling the housing issues faced by the low income group, such as the National Home Ownership Campaign.

“We are positive on the National Home Ownership Campaign as it will help developers clear unsold stock while at the same time, generate cash flow from these inventories (despite lower margins), thus providing them huge savings on financing costs and alleviate the overhang situation,” it said.

CGS CIMB said the National Home Ownership Campaign, which will be held in March, aims to clear the backlog of unsold residential properties.

“This campaign could create some feel-good factor for the property sector in the short term, but affordability is still the main issue. We do not see any extra perks for buyers to purchase properties at the campaign, unless there are extra incentives or lucrative markdowns in property prices.

“We gathered that the majority of developers already offer 10% to 15% discounts/rebates for the developer’s unit.”

AmInvestment Bank Research is maintaining a neutral view on the property sector as it does not expect earnings surprises in the short-to-medium term.

“Our top picks for the sector are: Sunway Bhd given that its local property launches have been generally well received due to good locations, and diversified income based; E&O for its prime land bank, including reclamation rights on Penang island and Mah Sing for its quick turnaround property development model.”


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