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‘Unfit’ property developers will fall

March 26th, 2020 Leave a comment

construction

With the Movement Control Order (MCO) in Malaysia extended for another two weeks to April 14, 2020 to curb the spread of the COVID-19 outbreak, property sales galleries will remain closed and construction works halted until then.

Property developers may have a slight buffer from unbilled sales to cushion the near term impact of the MCO but those with high gearing and bad credit record are in a precarious situation, said RHB Research Institute senior analyst Loong Kok Wen.

Although Bank Negara Malaysia’s six-month loan deferment package would offer much needed help, developers still need to bear operational costs such as salaries.

“It is very hard to have equity call or secure new bank loans now. Smaller developers with poor performance risk winding-up,” said Loong in a phone interview with EdgeProp.my.

She also expects listed developers to revise their sales target lower and announce weaker results in the upcoming quarters.

Nevertheless, “Although there are currently very little demand in properties, but with some demand suppressed now, it might result in a pent up of sales upon recovery of the market,” Loong added on a brighter note.

In a separate interview, Savills Malaysia managing director Datuk Paul Khong opined that developers who end up in dire straits would be those who have poor sales track record and cash flow position.

“Or they may be offering wrong product offerings or have projects in bad locations,” he said.

“Government land office and property galleries are all closed now and sales are at a standstill until the MCO is over. If the MCO continues further, with cost of operations such as salary payouts still running, then losses are expected,” he added.

Simultaneously, consumers’ general affordability on properties will also be affected.

To help boost property sales, Khong hopes that the government could look into easing entry into property financing and allowing reduction in Real Property Gains Tax (RPGT) and Stamp Duty rates.

Source: EdgeProp.my

 

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