KUALA LUMPUR: Sales of new properties are expected to improve gradually in the second half (2H) of 2020, supported by incentives in the short-term Economic Recovery Plan (Penjana), said MIDF Research.
The incentives include the reintroduction of Home Ownership Campaign (HOC) for residential properties from RM300,000 to RM2.5 million, the uplift of the 70 per cent margin of financing limit for the third housing loan onwards for properties valued at RM600,000 and above during the HOC period and real property gains tax (RPGT) exemption for three residential properties per individual.
MIDF Research said besides that, rising work-from-home (WFH) may drive higher demand for bigger homes.
"Workplace culture changed as the Covid-19 pandemic has led to nationwide employees WFH during MCO (Movement Control Order). The new remote work culture is expected to be the new normal going forward," it said.
Subsequently, the firm expects loan demand to recover in 2H.
According to Bank Negara Malaysia's loan statistics, total applied loan for properties improved sequentially 52.9 per cent month-on-month (m-o-m) to RM13.1 billion in May after plunging 64.8 per cent m-o-m in April, due to the disruption to business activity following the commencement of MCO.
Nevertheless, MIDF Research said total applied loan in May was lower by 61.8 per cent year-on-year (y-o-y) while cumulative total applied loan in the five-month period of 2020 was lower by 33.6 per cent y-o-y, indicating buying interest was subdued.
"Looking ahead, we expect buying interest to recover in 2H due to incentives introduced in Penjana," it said.
Meanwhile, MIDF Research expects property inventory to continue to decline this year due to the reintroduction of HOC.
According to data released by National Property Information Centre (NAPIC), unsold completed residential units in Malaysia had eased for four consecutive quarters in Q1 2020 since Q2 2019.
Latest data as of Q1 2020 saw that unsold completed residential units eased 3.2 per cent quarter-on-quarter (q-o-q) and 9.8 per cent y-o-y to 29,698 units.
"We think that the decline in property inventory were largely due to HOC in 2019 and aggressive efforts of property developers to clear their inventory whereby developers offered discount and attractive package to attract property buyers," it said.
MIDF Research upgraded the sector's rating to "positive" from "neutral", with its top picks being SP Setia Bhd and Mah Sing Group Bhd, as their products are more towards affordable to mid-range properties which cater for demand of owner-occupiers.
"While we reckon that the upcoming Q2 2020 earnings by developers will be dismal due to the business disruption from MCO, we think that the negatives have been largely priced in considering that KL Property Index has declined by 23.6 per cent year-to-date.
"We opine investors should look forward to earnings and new property sales recovery in 2H 2020 which will be underpinned by Penjana incentives and record low interest rate. Besides, the lower property inventory has also eased the concern of property overhang," it said.