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KUALA LUMPUR, Jan 6 -- Despite an encouraging pick-up in demand for properties in 2021, RHB Investment Bank Bhd (RHBIB) has maintained a neutral or cautious view for the sector in 2022 as it foresees a choppy road to recovery.
In its real estate sector research note, it said some negative headwinds may hinder the continued recovery in property sales as well as earnings growth.
“These include a resurgence of COVID-19 daily tally or emergence of new variants, high levels of building material prices, a potential overhang among property stocks ahead of the general election, and earlier-than-expected interest rate increase,” it said.
For 2022, RHBIB expects property sales to grow by another 10-15 per cent year-on-year.
However, sales in the first quarter (Q1) of 2022 would likely be weak as the Home Ownership Campaign (HOC) expired on Dec 31, 2021, it said, noting that so far, the government has not announced plans to extend the HOC.
"We believe both property buyers and developers are now more acclimatised to the ‘new normal’, where property viewing and marketing activities are conducted via digital platforms.
"However, market sentiment may still swing, especially if the new virus variant (Omicron) is more contagious or deadly. Even without that, a sporadic spike in COVID-19 daily infection cases will also trigger market fears from time to time.
"As such, the economic recovery will be delayed. Demand for property, as a result, will also be negatively affected," said the research firm.
RHBIB noted that the sector’s overall performance was flat in 2021, as the various lockdowns throughout the country and political turmoil that emerged in August dampened market sentiment.
It said the KL Property Index fell by 4.2 per cent versus FBM KLCI’s -3.7 per cent in 2021, adding that the short rally in October was primarily due to market expectations of some goodies to be announced in Budget 2022, but the subsequent disappointment led to an immediate share price correction.
It highlighted that there was a notable lack of catalyst for the sector under Budget 2022.
“Apart from the withdrawal of the real property gains tax (RPGT) for disposal of property beyond the fifth year, the government had not mentioned any plans to attract new domestic and foreign direct investments, or new economic corridors to re-start the economic engine.
“There was also no mention of any new mega infrastructure projects and only a brief mention of the MRT 3 project, thus the property sector will probably have to continue tapping on the current ongoing infrastructure projects to spearhead the recovery,” said RHBIB.
However, the investment bank remains hopeful that the property market would gradually stage a sustainable recovery in late 2022-2023 -- possibly after the next general election -- in tandem with the continued pick-up in economic growth and better absorption of the overhang unit.
It named Matrix Concept Holdings Bhd as its top pick, with a 'buy' recommendation and target price of RM2.47 due to the company's solid balance sheet, consistent property sales as well as earnings and dividend delivery.
“Its strategic exposure in affordable landed township development will likely ensure sustainable demand, and consistent cash flow," it added.
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