CIMB ‘overweight’ on property mart

Research house sees sales picking up in second half of 2014 amid positive news flow.

CIMB Investment Bank remains positive on the property sector and expects property purchases to pick up pace in the second half, ahead of the implementation of the goods and services tax in April next year.

It maintains an “overweight” call on the sector and has chosen Mah Sing as top sector pick.

The research house said in its property market report yesterday that re-rating catalysts for the sector include strong sales by developers in the second half of the year, and positive news flow on infrastructure projects, such as MRT2 and high-speed rail from Kuala Lumpur to Singapore.

“We remain optimistic on the prospects for the residential property sector due to favourable demand and supply dynamics as well as the strong affordability,” it said.

“We do not subscribe to the view that residential property prices will fall as a result of the impact from the numerous measures by the government to curb speculation. This is because residential property prices are largely a function of economic prospects and job opportunities, as well as confidence and sentiment,” it added.

With real gross domestic product growth forecast to accelerate from 4.7 per cent last year to 5.0 per cent this year and the country enjoying what is effectively full employment, combined with a firm stock market, it does not see prices falling at all.

“We believe that house prices will continue to rise 5-10 per cent per annum this year on the back of supply constraints and buyers jumping back in before the implementation of GST in April 2015,” it said.

Transaction volume, however, could shrink by another 10 per cent on the back of the cooling measures.

The supply overhang remains manageable and unsold stock stayed the same at around 66,000 units. Unsold stock declined in the Klang Valley and Penang but rose in Johor.

CIMB IB is most cautious on the Johor market due to the torrent of supply coming from China developers.

However, for developers with townships in Johor that can launch landed properties as well as industrial properties, sales should continue to hold up well.

“While we continue to remain bullish on the prospects of Iskandar Malaysia as a growth corridor, the property play there will likely cool off after last year’s big price spike,” it added.

New tax a boon for residential properties

The upcoming introduction of the goods and services tax (GST) would positively impact the residential property sector as investors would likely invest in residential segment this year rather than next year. Talhar & Wong Sdn Bhd managing director Foo Gee Jen said this is because many perceive that the price of houses could be higher in 2015 when the GST is introduced. ”The perception now is that residential developers are going to transfer the additional costs to the buyers once GST is implemented. So people would think that they are going to pay more. ”This would result in the buyers deciding to purchase houses this year instead of next year,” he told a media briefing on property market ,here, yesterday.

This, Foo said, would push the demand for residential property as well as its prices. The GST will be implemented in Malaysia by April 2015.

Meanwhile, the residential demand, particularly affordable housing, will remain highly fuelled by a rapidly growing population of adults between the ages of 25 and 54 and expanding middle-income groups. Foo said the mid-segment rental market will remain upbeat on the back of a healthy growth in housing demand.

He believes that the overall residential market would remain healthy although the high level of household debt is likely to weigh down on buyers’ purchasing ability. In 2013, the housing market was upbeat with an estimated total of 12,808 new units of terraced, semi-detached and detached houses launched. The new supply for 2014 is estimated to fall to some 9,800 units in total namely 1,000 detached, 1,800 semi-detached and 70,00 terraced units, Foo said.

He said this year, developers will face the threat of rising construction cost fuelled by higher oil prices and rising material costs. The cost hike has led developers to build units of smaller floor areas, he said, adding that smaller units are increasingly more popular since they are affordable to a larger segment of prospective buyers.