KUALA LUMPUR: The property sector has stood out this year as one of the sectors that performed well, buttressed by the improvement in year-to-date earnings sales and launches, according to Hong Leong Investment Bank Bhd (HLIB).
HLIB said the sector enjoyed a boost in earnings, resulting from an acceleration in billings recognition as labour shortage conditions improved this year and higher sales.
"Secondly, the improvement in sales was mainly due to higher new launches year-to-date. With more new products in the market, the primary market also consequently saw more transactions," it said in a note today.
HLIB said the launches picked up strongly this year from a low base in preceding year as a result of improvement in supply-side conditions including easing of labour shortage condition; easing labour costs; and stabilising building material costs.
"Delving a bit deeper on the outperformance of the sector, we would notice that much of the sector's improvement was supply-side driven.
"Firstly, developers enjoyed an earnings boost due to higher progress billings from acceleration in construction to catch up.
"However, this effect should dissipate in 2024 as we expect a normalised level of billings ahead.
HLIB said the improvement in sales was partly due to some buyers shifting from secondary to primary market as more new products are available in the primary market.
"We do not think property demand has changed much this year given that the domestic economy has only seen moderate growth so far this year at 3.8 per cent.
"Thus, we think developers are unlikely to raise their launches significantly in 2024 as the market is not ready to absorb the higher number of launches," it added.
HLIB also expects billings to normalise while sales and launches should see a more moderate growth ahead, thus turning less bullish on the sector and downgrading.
It has rated the sector to neutral from overweight.
"Nonetheless, there are a few selective names under our coverage that have the potential to outperform the sector and market and our top picks are Sunway Construction Group, OSK Property Holdings Bhd, IOI Properties Group and Sime Darby Property," said HLIB.