HOC extension to help developers’ sales

Based on the developers’ sales figures in 1Q19, the initial 6 months of the housing campaign appear to have been positive, says analyst

by NG MIN SHEN/ pic by HUSSEIN SHAHARUDDIN

THE government’s move to extend the Home Ownership Campaign (HOC) 2019 will help property developers’ sales, but may not necessarily translate into a massive boost for an industry facing soft market conditions and a large stock overhang.

Housing and Local Government Minister Zuraida Kamaruddin announced last Sunday the government has extended the HOC for six months until Dec 31 this year, following requests by both buyers and developers to prolong the duration of the sales campaign.

Zuraida said the extension of the campaign, which has been well received since its launch in January 2019, would hopefully “allow a lot more people in the country to own a home and help put the housing industry on the right track”.

“I think the extension will definitely help developers to sustain or replenish existing sales. For it to have a very significant impact is difficult, considering that the market is soft, but at least, it will help them to sustain their numbers,” AllianceDBS Research Sdn Bhd analyst Quah He Wei told The Malaysian Reserve (TMR).

He said the initial six months of the housing campaign appeared to have been positive for developers, based on their sales figures released in the first quarter of 2019 (1Q19) financial results of public-listed property companies.

The Real Estate and Housing Developers’ Association Malaysia (Rehda) earlier this year voiced its confidence that developers would achieve at least RM3 billion in sales during the HOC.

However, this is only a fraction of the property overhang in Malaysia,

which stood at 32,313 unsold units valued at RM19.86 billion as at 4Q18, according to data from the National Property Information Centre (Napic).

“Judging from the over 7% rise in lending for the purchases of residential properties in May, this suggests the HOC has positive impact on property demand. This will help to clear the unsold units which stood at over 30,000 units for completed residential properties as at end-2018,” Bank Islam Malaysia Bhd chief economist Dr Mohd Afzanizam Abdul Rashid told TMR.

On the earnings side, however, property players may not necessarily see improved profit margins as the selling prices of homes under the campaign

have mostly been discounted, Quah noted.

“Developers’ profits won’t be recognised immediately as there’s usually a lag period. When they will see the sales translate into profits depends on whether the project being sold is in the construction phase or already completed. If it’s fully completed, they will see the impact immediately,” he said.

Quah said that the extension likely came in light of requests from Rehda and other industry players, given the campaign was slated to run from January onwards but was only officially launched in March.

The government-backed initiative is for housing developers registered with

Rehda, the Sabah Housing and Real Estate Developers Association (Shareda) and the Sarawak Housing and Real Estate Developers’ Association (Sheda).

It was initiated to help developers boost sales, increase homeownership among Malaysians and address the RM19.86 billion worth of unsold units as at end-2018. Compared to 4Q17, the residential overhang in 4Q18 was a 30.6% increase in the volume of residential units unsold and a 27% rise in the value of residential units, Napic said.

Rehda in March said developers recorded sales of around RM2 billion to RM3 billion during previous HOCs held in 1998 to 1999 and 2002.

Among the industry stakeholders, LBS Bina Group Bhd last Friday urged the government to extend the HOC, stating it managed to secure sales of RM290 million between May and June 2019 due to the campaign.

Eco World Development Group Bhd last Thursday said it recorded sales of RM1.03 billion during the November 2018 to May 2019 period, boosted partly by the HOC.

For properties registered under the HOC, local homebuyers will enjoy stamp-duty waivers on instruments of transfer for properties priced up to RM1 million and for loan agreements of up to RM2.5 million.

Developers are also required to provide a minimum 10% discount on the properties sold.

Further, first-time homebuyers will get a stamp-duty exemption on the memorandum of transfer and loan agreement for homes priced at RM300,000 and below, while for houses priced between RM300,001 and RM500,000, a stamp-duty exemption is applicable for the first RM300,000 of the property price.

These are valid for purchases whereby the sale and purchase agreements are completed between Jan 1, 2019 and Dec 31, 2020.

For the time being, equity investors’ response to the HOC extension appears to be lukewarm.

The Bursa Malaysia Property Index rose 0.04% to 901.27 at market close yesterday, while the MSCI AC Asia Pacific Index declined 0.19% and the FTSE Bursa Malaysia KLCI (FBM KLCI) added 0.69%.

The property index, whose members have a total market capitalisation of RM73 billion, was yesterday led mostly by IOI Properties Group Bhd which rose 0.72%.

Since the start of the year, the gauge has gained 2.88%, while the FBM KLCI has slipped 0.41%.

The property benchmark is also 17.7% below its 52-week high on Aug 1, 2018, and 5.44% above its low on Oct 25 last year.