Muted budget seen for property sector

PETALING JAYA: House price growth is expected to remain stagnant over the next four to five years on assumption that there will be no major policy changes during the period.

In the immediate term, Kenanga Investment Bank Bhd equity research head Sarah Lim said she expected a relatively muted Budget 2017 for the local property sector.

“Budget 2017 will still be very ‘rakyat-centric’, where goodies will be given out under government housing schemes (for example PR1MA) and, if we are lucky, additional subsidies for government affordable housing.

“We expect 1Malaysia People’s Aid or BR1Ms to be given out as well. But such measures will not have any significant impact on our universe of developers,” she said recently during a presentation at the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS).

Lim sees Malaysia’s overnight policy rate remaining for now, adding that any further cuts are unlikely to spur lending to the sector.

“Fiscal measure-wise, lowering or removing the real property gains tax (RPGT) will be detrimental to the property market, as it may cause panic-selling which further exacerbates the oversupply situation.”

RPGT is payable to the Inland Revenue Board when one sells a property for a profit within a prescribed period since purchase, currently being five years.

Lim, however, said that if there was an increase in the withdrawal limit from the Employees Provident Fund (EPF) Account 2 (30% of the EPF account), this would help increase home ownership substantially.

“But such actions may require long-term study by the EPF due to long-term repercussions on future retirees,” she said.

Separately, Lim said the banking system was still tight on lending liquidity to the property sector.

“Expect a more flattish U-shaped downcycle because tightening property measures has already helped the market cool off, resulting in greater prudence among developers, banks and property buyers.”

At PEPS last week, Khong & Jaafar group managing director Elvin Fernandez said the Malaysian residential property sector is expected to remain flat going into 2017, weighed down by uncertainties in the global economy.

On a positive note, Lim said the slowdown in the local property sector would result in developers scaling down property launches – hence lowering the likelihood of abandoned projects comparable to conditions during the Asian financial crisis in 1997 and 1998.

“Unlike during the Asian financial crisis, listed developers now have much lighter balance sheets.”