Property developers and their panel of contractors are also better prepared to ensure the building material and equipment supplies are available to minimise disruptions to ongoing construction works. — Bernama photo
KUCHING: Although building works for most projects can continue, the second movement control order (MCO 2.0) imposed in six states will adversely impact property sales of developers.
Affin Hwang Investment Bank Bhd (AffinHwang Capital) believed this to be so, since sales galleries will be closed in the MCO 2.0 affected areas that contributed 47 per cent of total property transaction volume and 70 per cent of transaction value in the first nine months of 2020 (9M20).
“Aggregate sales and core earnings for major property-related companies under our coverage contracted by 34 per cent year on year (y-o-y) and 55 per cent y-o-y respectively in the first half of 2020 (1H20).
“This was mainly due the MCO imposed by the government during a 47-day period on March 18 March to May 3, 2020. The impact of MCO 2.0 will likely be less severe due to the shorter duration, unless extended, and the property companies’ expansion of online marketing efforts such as virtual property tours following MCO 1.0.”
AffinHwang Capital saw that property-related companies with major overseas property projects such as IOI Properties Bhd (IOI Properties) and Gamuda Bhd saw relatively less impact due to robust overseas sales.
“However, property companies that own retail malls and hospitality businesses such as IOI Properties and Sunway Bhd were adversely impacted by the MCO due to lower mall footfalls (granting rental waivers to tenants) and hotel occupancy rates.
“We believe the core earnings impact will be less severe this time around as the property developers under our coverage are able to operate most of its construction
sites during the MCO period.”
Meanwhile, AffinHwang Capital said progress billings to customers can continue during the MCO based on the percentage completion rate.
Property developers and their panel of contractors are also better prepared to ensure the building material and equipment supplies are available to minimise disruptions to ongoing construction works.
Standard operating procedures (SOP) are also in place to reduce the risk of Covid-19 infections at the construction sites and to meet the government’s
requirements to operate during MCO.
“If the MCO is just for two weeks, we believe the impact on sales is not substantial since the first quarter is seasonally a slow quarter due to the festive holidays,” it said.
“There is a risk that MCO could be extended given the surge in Covid-19 infection cases recently and it could take a longer period to flatten the curve. But the MOH indicated that the maximum MCO 2.0 period is 4 weeks.
“The prolonged period of MCO and the Covid-19 pandemic affects property market sentiment due to concerns of job losses.”