KUCHING: The supply-demand balance in the property market will likely persist and analysts also anticipate the lifting of banking moratorium loans on Sept 30, 2020 to exert some pressure on home prices.
According to the research arm of Kenanga Investment Bank Bhd (Kenanga Research), property developers continue to face supply-demand imbalance amidst the Coronavirus Disease 2019 (Covid-19) crisis.
“The supply-demand imbalance in the property market is expected to persist,” the research arm said in a sector update on property developers.
“Essentially, the high inventory levels – comprising existing stocks and incoming supply of unsold units still under construction – will remain elevated in the foreseeable future.
“On the other hand, demand will likely weaken in the midst of economic uncertainties arising from Covid-19 and oil price slump.”
Furthermore, Kenanga Research highlighted that once the banking moratorium expires on Sept 30, 2020, there could be desperate sellers in the secondary market which will compete with the primary market for buyers.
“Depending on the severity of the situation (which would only be assessable post Sept 30), these secondary sellers could possibly drag prices down.”
Additionally, the research arm highlighted that because of this, potential buyers might hold off purchases beyond Sept 30 for deeper discounts.
It noted that the confluence of these factors would exacerbate the already weak supply-demand dynamics faced by the industry.
“Overall, property developers will find it increasingly challenging to clear their inventory of completed properties and achieve new property sales targets this year.
“Case in point, post first quarter of current year 2020 (1QCY20) results, we have seen developers under our universe reducing sales targets by as deep as 50 per cent.”
That said, Kenanga Research recalled that the government acted timely to reinstate the Housing Ownership Campaign (HOC), allow 90 per cent loan-to-value ratio for third home purchases and abolish real property gains taxes (RGPT) which would help support the property industry amidst these tough times.
“Other policies that could further boost the space would include more automated mechanism to release unsold Bumi units in certain states, lowering compliance costs, and longer loan tenures amongst others.”