ADDITIONAL RELIEF: Economists expect more incentives to boost medium- to low-cost market
THE 2015 Budget is expected to introduce some relief for first-time house buyers following the broader policies governing the property sector that were introduced prior to budget tabling, says analysts.
According to MIDF Research property analyst Ahmad Annuar Abdul Rahman, policies such as a 50 per cent discount on stamp duty and/or Developer Interest Bearing Scheme (DIBS) for first time buyers could be introduced to aid purchases.
Ahmad Annuar felt the government may also introduce Goods and Services Tax (GST) rebate for building materials that are certified as being used to build medium- to low-cost properties.
“Assuming our expectations prevail, this should benefit companies such as LBS Bina Group Bhd, Glomac Bhd and IJM Land Bhd, which have a good mix of medium- to low-cost properties.
“To a lesser extent, UEM Sunrise Bhd could also benefit due to its product mix as well as landbank sale,” he told Property Times.
On Real Property Gains Tax (RPGT), Ahmad Annuar believed there will be no changes to the current ruling.
Prime Minister Datuk Seri Najib Razak, who is also the Finance Minister, will announce details of the annual budget next Friday.
With Malaysia aiming to become a high-income nation by 2020 with a US$15,000 (RM48,750) gross national income per capita target (US$10,400 in 2013), the budget will play its part in formulating a consistent and sustainable policy framework towards reaching this goal.
The budget will focus on stimulating growth, improving Malaysia’s fiscal position and raising the people’s standard of living.
For the property sector, economists believe there may be more cooling measures for the market, including raising the interest rates and tighter lending.
In the previous budget, Najib announced a significant increase in the RPGT rates to further curb speculative activities.
For gains on properties disposed of within the holding period of up to three years, RPGT rate was increased to 30 per cent, and for disposals within the holding period of four and five years, the rates were raised to 20 per cent and 15 per cent, respectively.
For disposals made in the sixth and subsequent years, no RPGT is imposed on citizens, while companies are taxed at five per cent.
A GST regime was also introduced. It has been proposed that the GST rate be fixed at six per cent, effective April 1 next year.
The sale, purchase and rental of residential properties are expected to be exempted from GST while there will be implications for commercial and/or industrial titles.
There is also an increase in the threshold for foreign purchases of real estate in Malaysia — from RM500,000 to RM1,000,000.
In addition, there was a ban on DIBS, aimed at controlling property prices. This measure prohibits developers from implementing projects that have DIBS features so as to prevent them from incorporating interest rates into housing loans during the construction period.
The slew of cooling measures have impacted the property market.
According to the Property Market Report 2013 released six months ago by the National Property Information Centre (Napic), the number of new launches fell last year to 48,290 units after three straight years of growth.
The report also showed that transaction volume fell 10.9 per cent to 381,130 units last year. The value, however, rose from RM142.84 billion in 2012 to RM152.37 billion.
This is clear that property prices have gained strength despite the measures to curb speculation.
The Malaysian House Price Index jumped to 192.9 points last year against 172.8 points the year before. Average prices rose 10 per cent, from RM241,591 to RM266,304.
Houses priced between RM250,000 and RM500,000 were the most popular, capturing 27.3 per cent of total transactions, while demand for those in the low-cost RM100,000 to RM200,000 category softened.
Ahmad Annuar said he expected property prices to continue to rise despite government efforts to curb speculation through the 2014 Budget as it only addressed one of the causes for the increase in real estate prices — speculators.
Land, construction and compliance costs, as well as unfair and unreasonable conditions imposed by state and local authorities remain to be addressed.
“We expect the increase in prices to be mitigated by GST exemption on the affordable houses below RM600,000. The high-end properties are likely to be less sensitive to the GST.”
He said this year’s budget surprises might include further increase in the threshold for property acquisition by foreigners.
“This could be a setback for stocks that have more sizeable exposure to high-end properties, such as Eastern & Oriental Bhd, SP Setia Bhd and Sunway Bhd. We are neutral on the (property) sector as we see the GST imposition may lead to some reduction in disposable income and dampen consumer sentiment in the near term.
“However, we think this could be offset by the government’s targeted measures aforementioned while longer term prospects remain positive against the positive outlook for the domestic economy,” he said.
Maybank Investment Bank Bhd (Maybank IB) chief economist Suhaimi Ilias said the property sector would be spared from any bad news in the upcoming budget.
“We do not expect further property cooling measures or curbs. Indications are already pointing to an easing property market and financing after the drastic measures taken in the 2014 Budget that were followed by some state government measures, Bank Negara Malaysia’s 25 basis points hike and the banking system’s more stringent loan approval and risk management process.
“At this juncture, major surprises will be the government relaxing measures currently in place, tightening existing measures, introducing further measures such as raising RPGT and increasing stamp duties, as well as restrictions on bank lending to developers and buyers.
“But again, we think this is very unlikely. Whatever is already in place for the property sector with regard to GST and RPGT will remain,” Suhaimi said.
RHB Research property analyst Loong Kok Wen does not expect new drastic measures on the property sector nor relaxation of policies.
She also thinks there would unlikely be any announcement on the RPGT structure nor the re-introduction of the DIBS scheme.
“But if it does happen (re-introduction of DIBS), it’ll be good news for the property market as it will encourage more buying activities. Topics on GST are widely expected. I hope the government will provide more details on the GST structure, because for the property sector, there are still a lot of grey areas to be resolved.
“For now, I expect demand to pick up in the first quarter of 2015, just before the implementation of GST, as more and more people are increasingly aware of the GST impact on property prices. After the GST comes in, the property market will likely be subdued for three to six months,” she said.
On stock picks, Loong finds affordable housing players such as Tambun Indah Land Bhd, Matrix Concepts Holdings Bhd and Hua Yang Bhd the safest bets.
Edmund Tham, head of research at Mercury Securities, is also not expecting anything groundbreaking from the 2015 Budget.
“It is hard to say what this year’s budget will offer or whether the property sector would be spared from any bad news. What we can expect is some news on GST, such as who or what will get exemptions,” Tham said.
Tham is not so bullish on the property sector but expects strong demand for affordable residential housing.
“And this will put a floor on prices,” he said.