MacQuarie Research: Developers will face pressure without Home Ownership Campaign (HOC)
Home Ownership Campaign (HOC) strives to help reduce the number of overhang units in the country. It also hopes to help the potential buyers save money when buying a property. It has ended on 31st December 2021. What has happened to the overhang properties and the developers who owns those units then? We have one latest analysis by Macquarie Research. Happy reading.
Article in nst.com.my MacQuarie Research: Developers will face pressure to sell their unsold stocks without Home Ownership Campaign (HOC). Developers would also be under pressure because of pandemic uncertainties, increasing raw-material costs, potential interest-rate hikes and low affordability.
It said, “We reiterate our Outperform call on Sime Property given the potential for its ongoing strategic refocus to grow recurring income streams and its focus on industrial real estate.”
Macquarie Research said based on Bank Negara Malaysia’s January data on loan applications for residential purchases, demand appeared to have started to decline. “We believe the trend will continue throughout 2022.”
Please do refer here for the full article: Article in nst.com.my
Overhang versus secondary market?
Before we continue, please note that from the residential property transactions every year, secondary properties typically accounts for 80 percent of all the transactions. New properties, the ones sold by property developers, whether it’s newly launched or even the unsold stock typically account for 20% of all the transactions. Thus, when we say new property transactions will drop, it does not necessary mean that the total transactions will drop.
Unsold new properties especially the overhang ones have valid reasons why they were unsold and later entered the overhang category. Overhang means completed units which remain unsold for 9 months. In other words, if the developer has completed the units and it’s unsold, they are known as unsold units and it will become overhang units only after 9 months unsold categorisation.
Thus if we follow what MacQuarie Research is saying, it meant that perhaps we may want to skip buying stocks of property developers except Sime Property. I do not own any property developer stocks as at 16th March 2022. Not thinking of buying any in the near future too.
However, if our conclusion is that the whole property market will be challenging, this is not what MacQuarie Research is saying yeah. Happy understanding that there is a huge difference between property developer, overhang, unsold and even property developer shares.
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