The banks can only earn good profits if people continue to borrow and is able to pay back on time. If the borrowers did not pay back on time, then the Non Performing Loans will go up and the banks will have to allocate more of their funds for this purpose. If the banks are not lending and people are not borrowing, they will lose money because they need to pay for their fixed operation costs.
If the banks are not lending, then property transactions also could not happen because I do not know that many people who buys a property of a few hundred thousand ringgit by cash. In other words, the property market needs the banks to lend and the buyers to borrow and pay on time. Another measure of whether the property market is doing well or not would be to look at the developers’ results.
Article in themalaysianreserve.com MIDF Amanah InvestmentBank Bhd (MIDFResearch) analyst Jessica Low said, “Overall, we think the performance of property developers should be better in 2019 due to the recovery in buying interest from property buyers. Nevertheless, we reckon that the recovery is marginal as overall buyer sentiment remains cautious due to the lingering overhang issue in the property sector.”
Affin Hwang Investment Bank Bhd senior associate director Loong Chee Wei expects the developers to report better results. He said, “Sustained revenue growth and a slow recovery in profit margins should drive core EPS growth of 7% YoY in 2020. We believe most property developers’ financial positions improved with lower inventories reducing average net gearing to 0.38 time in 2019 from 0.4 time in 2018.” Please do go ahead and read the comprehensive Article in themalaysianreserve.com
Briefly, it seems that financial year 2019 is a good year for the developers, especially after a weak performance in 2018. It also meant that the developers have sold enough of their units from their launches and the construction is progressing well too. Perhaps we could also stop thinking of the property market as totally negative and see those silver linings as well?
Alternatively, look at the property developers mentioned in the article and perhaps buy some of their stocks and wait for better performance in 2020? It does not need to be just property investment yeah. That’s always very expensive. It could have been just a few thousand units of the developers’ stocks too. This is especially when they could still perform well under current market circumstances. Happy deciding.
Next suggested article: “Oversupply” of developers. Supposed to be bad, right?