PETALING JAYA: The property sector should see a gradual recovery in demand as borders reopen and international travel resumes, bringing back interest from buyers seeking out affordable locations within the region.

       Optimism in the sector, however, may be tinted by potential risks of stagflation and rising cost of construction.

       In a report yesterday, AmInvestment Bank said a potential rise in property transaction volumes is on the cards, especially in the residential segment with the reopening of international borders on April 1.

       This is given the relative regional affordability of Malaysia’s developments, notwithstanding stricter criteria for the Malaysia My Second Home programme.

       This will provide ongoing support to local developers given the absence of a further extension of the Home Ownership Campaign (HOC) this year.

       Developers had seen encouraging new sales in 2021 despite the pandemic mainly thanks to the HOC, digital marketing initiatives and new launches.

       AmInvestment noted that developers under its coverage had registered a commendable 37% year-on-year (y-o-y) growth in new sales last year.

       “For financial year 2022 (FY22), most developers are setting conservative sales targets (lower than FY21 actual sales) likely due to the expiration of the HOC.

       However, Mah Sing Group Bhd and Lagenda Properties Bhd, which focus on affordable housing developments, are setting higher sales targets in anticipation of pent-up demand in this market segment,” it said.

       The research house highlighted that most of the developers under its coverage returned to the black in FY21 – except for UEM Sunrise Bhd – registering improvement in their bottom lines following the easing of containment measures under the National Recovery Plan in the fourth quarter (Q4) of last year.

       For the Q4 FY21 period, two companies’ performance were in line with its forecasts, while three underperformed and two outperformed.

       AmInvestment also noted several positive developments among property companies last year including ambitious landbanking activities in prime areas with good public infrastructure and connectivity to the KL city centre.

       This bodes well for their future projects.

       Additionally, they are supported by the exemption of real property gains tax (RPGT) for house sales starting from the sixth year of purchase (previously taxed at 5%) under Budget 2022.

       However, the research house cautioned that wider events pose a growing risk of stagflation, which may weigh on the property sector.

       “The geopolitical risks posed by the Russia-Ukraine conflict are likely to intensify inflation and recessionary concerns, resulting in potentially lower disposable income amid the higher unemployment rates. “Under the current climate of uncertainty, potential house buyers may adopt a wait-and-see approach that could depress residential demand and cause a stagnation in house prices.”

       Additionally, a potential hike in the overnight policy rate (OPR) could have a negative impact on consumer sentiment and purchasing power, dampening overall demand for properties.

       “Nevertheless, we believe the impact will be manageable because the OPR is likely to remain low in comparison to pre-Covid levels.

       “Our top pick for the sector is Sunway Bhd given the strong brand recognition established by its highly successful landmark developments and expanding healthcare business, supported by substantive unbilled sales and outstanding order book,” it added.

       AmInvestment has a “neutral” stance on the property sector.