KUCHING: Property analysts applauded Budget 2017 for its focus on first home buyers while others found that the social housing theme prevailed as a lot more measures were put in by the government to help the B40 group.
According to the research arm of MIDF Amanah Investment Bank Bhd (MIDF Research) in its property sector update, the government has announced a new special “step-up” end-financing scheme for the PR1MA program.
“Through this scheme, financing will be easier and more accessible to the buyers with total loan up to 90 per cent to 100 per cent with loan rejection rate to be reduced drastically.
“Stamp duty exemption is also increased to 100 per cent (from 50 per cent) for house purchase and loan (only for house with value up to RM300,000 for first home buyers).
“We believe that these measures should relief the burden of first home buyers slightly,” MIDF Research said.
It has however, pointed out that the public listed developers will not benefit significantly as almost all of their products are in different price categories.
Meanwhile, the research arm of Kenanga Investment Bank Bhd (Kenanga Research) highlighted in a property developers sector update that the measures announced were largely for social housing, which is a big plus for the B40 group.
Kenanga Research noted that key social housing highlights included National Blue Ocean Strategy (NBOS) which addresses homes priced no more than RM300,000 per unit (for example, PR1MA), to name a few.
“The government is also introducing urban areas for rental to eligible youths,” it said.
The research arm further noted that there were no major easing banking policies towards the sector other than the special ‘stepup’ end financing scheme (provide up to 100 per cent from 90 per cent financing) which will only be for the PR1MA program.
This does not significantly benefit developers under its coverage.
Kenanga Research deemed this as a slightly disappointing Budget for listed developers under the research arm’s coverage as it was below its and market expectations.
As highlighted in the research arm’s recent sector report, the market was hoping for some easing of banking policies and higher Employee Provident Fund (EPF) Account 2 allocation for first-time home buyers, while its own expectation was just for the latter measure.
As there was no increase in EPF Account 2 allocation for home financing, MIDF Research was neutral on this as the status quo allocation remains.
Kenanga Research had also expected an extension of the 50 per cent stamp duty exemption for instruments of transfer/housing loan instruments for first-time home buyers (expires December 2016).
“However, what was announced was a 100 per cent exemption but only limited to units of no more than RM300,000 for first-time home buyers (January 2017 to December 2018), which again may not benefit listed developers significantly,” it said.
On another note, the higher stamp duty on instruments of transfer of real estate of more than RM1 million from three per cent to four per cent (by January 1, 2018) was a negative surprise in Kenanga Research’s view as it may deter some buyers and make it tougher for developers to launch such products.
“In fact, the commercial segment, like shop-lots or sizeable office/retail spaces, may feel the heat,” the research arm said.
Nonetheless, most developers under the research arm’s coverage have 70 per cent to 80 per cent of their local launch pipelines of products priced below RM1 million per unit and are likely to ramp up more of the affordable housing supply to maintain sales levels.
“In the meantime, this may potentially help developer’s clear inventories (i.e. those with titles) running up to the implementation date of January 1, 2018; we believe this would not cause an over surge in sales as demand for these properties have softened significantly,” it added.
MIDF Research also noted that this measure is expected to affect sales for high end house from 2018 onwards.
However, the research arm reckoned there will be a slight short term increase in demand to buy ahead in 2017 before the new measure takes effect.
On Real Property Gain Tax (RPGT) rate, MIDF Research pointed out there is no change while for Developer Interest-Bearing Scheme (DIBS), it is still disallowed.
“We are neutral on the unchanged RPGT rate as this means that the Government may view that the current policy is working and hence there is no further cooling measures needed,” it said.
Having said that, the DIBS ban stays and the research arm admitted that this means little cheer for property developers as well.
In a side note, Kenanga Research mentioned that disappointingly, there was no mention of Malaysian Vision Valley infrastructure roll-outs.
All in, Kenanga Research reiterated ‘neutral’ on developers.
Budget 2017 was largely a social housing-themed one, which does not benefit those under the research arm’s coverage.
“We had mentioned in our previous report that there could be some profit-taking amongst listed developers, especially big-cap ones which had rallied recently,” it said.
“We reckon the odds of developers missing targets for this year and guiding for more conservative ones for next year, have just increased due to the absence of ‘goodies’ for private developers this time around amidst an already challenging landscape.”
However, Kenanga Research will seek further guidance from developers in the coming result season for 2017 outlook, especially as quite a number of developers have proven creative and aggressive in marketing products to sustain their sales this year.
It noted that the next major sentiment booster is the potential overnight policy rate (OPR) cut (25 basis points (bps)) in the upcoming MPC meeting.
The research arm’s house view was that while there is room to do so, there is no major urgency.
“Even if the OPR cut takes place, it will at best help developers to achieve current sales targets and maintain market share,” the research arm said.
As for MIDF Research, the research arm maintained its ‘neutral’ view on the property sector due to lack of catalysts seen from Budget 2017 as well as weak performance seen from recent data.
MIDF Research noted that the latest Bank Negara statistics showed that “Approved Loan for Purchase of Property” in August 2016 decreased five per cent year on year (y-o-y) to RM11.28 billion.
“The decline in approved loan was mainly due to lower approval rate by the banks.
“However, an eight per cent improvement was seen on a monthly basis,” the research arm said.
It added that on a cumulative basis, total approved loan for the first eight months of 2016 (8M16) was at RM78.73 billion, down 20 per cent y-o-y.