Hong Leong Investment Bank Research (HLIB) said the cooling measures should lead to moderation in demand for investment property with a consolidation of prices in Melbourne and Sydney and expect sentiment to be dampened in the short term.
New South Wales (capital city: Sydney) will be proposing a stamp duty surcharge of 4% and a 0.75% land tax in its June 21’s Budget following the move by Victorian and Queensland.
The Victorian government (capital city: Melbourne) announced in its 2016-2017 Budget to impose additional stamp duty for foreign buyers (3% to 7%) effectively from July 1, 2016 and triple its land tax surcharge for absentee landholders from 0.5% to 1.5% from 2017. In addition, tightening measures are also introduced to the banking system.
“Under our universal of stock coverage, a few listed developers have exposure to the Australian market. SP Setia, UEMSunrise and Matrix have presence with majority projects concentrated in Melbourne which are subject to 7% stamp duty and 1.5% of land tax surcharge.
“In term of percentage of remaining total gross development value (GDV), the exposure in Australia is relative small, with SPSetia (2.9%), Matrix (1.4%) and UEMSunrise (1%),” HLIB said.
The research house noted UEMSunrise was targeting to launch St Kilda by end of the year with GDV of RM750mil (circa 38% of FY16’s total GDV launches). As such, any slowdown in Australia’s property market is expected to impact UEMSunrise on its new sales.
“In term of geographical profile of buyers, foreign buyers (non-Australians) accounted for a large percentage (ranging from 54% to 86%). The Chinese and Malaysian are the majority of the foreign buyers.
“We understand that majority of Malaysian buyers secure financing from local banks. That said, we would expect tightening of lending rules on foreigners to dampen sales growth,” HLIB said.
Nonetheless, HLIB maintained its “neutral” call on the sector. Its top picks is IOI Prop (Buy; target price RM2.77). It also has as “buy” on Sunway (target price:RM3.72).
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