Minimal Impact on Property Players and REIT

The overnight policy rate (OPR) cut is expected to have a minimal on local property players, especially real estate investment trust (REIT) companies, which are anticipated on continue being resilient.

Affin Hwang Capital, in a report, said most REITs under its coverage, namely, Axis REIT, IGB REIT, KLCC and YTL Hospitality REIT, had 70% of their borrowings pegged at a fixed rate.

In another side, the research house said other REITs, such as Pavilion REIT and Sunway REIT, had fixed rates for 43% of their borrowings.

Bank Negara cut its OPR by another 25 basis points to 2.50%, the lowest level since June 2010. In the long run, Affin Hwang Capital said a lower OPR should reduce the local REITs’ finance costs and lift earnings.

“Key sector downside risks include weak retail spending, lower economic growth, lower tourist arrivals and reversal in the global yield trend.”

Meanwhile, AmResearch in its report on the property and REITs sector said developers generally reported lower new sales year-on-year by about 6.8% in 2019, mainly due to slower market conditions.

Besides that, on the REITs segment, AmResearch said the outlook for retail properties, especially shopping malls, would remain stable in the medium term.

The research house said it may upgrade its neutral stance on the property sector to “overweight” if banks eased lending policies on properties; or if consumer sentiment improved significantly.
 


Source: Thestar @ Biz Property