More Property Mergers?

PETALING JAYA: The market has just seen UEM Sunrise Bhd proposing a merger with Eco World Development Group Bhd.

On whether there would be more mergers among property developers in the offing or consolidation in the market, Kenanga Research analyst Lum Joe Shen said it was unlikely for now.

Public Investment Bank Research opined that the proposed merger between UEM Sunrise and Eco World was not surprising given current challenging property market conditions, adding that sector consolidation is ripe to happen to strengthen market positioning.

Lum said that long-standing issues such as the lack of auto-release mechanisms for unsold bumiputra lots in certain states, compliance and capital contribution costs, high land conversion premiums, social housing obligations, and foreign buyer’s threshold require cooperation between the federal and state governments, and the developers to be remedied.

The lower interest rate and incentives will help support property sales but unlikely to increase it, said Lum.

UOB Kay Hian Research said the consolidation between UEM Sunrise and Eco World will give little benefit to the sector as a whole property sales will remain weak amid fears of a lockdown arising from the resurgence of Covid-19 cases with the oversupply of serviced apartment at alarming levels.

“Back in 2017 when S P Setia Bhd took over I&P Group, the sector’s fundamentals remained unchanged. The overall sales and take-up rates were not encouraging while property overhang remained elevated, ” the research house said.

UOB Kay Hian stressed that property sales was still a concern and that it will be sluggish despite the re-introduction of the House Ownership Campaign due to the subdued global economic growth which may raise overall unemployment rates.



Source: TheStar