PROPERTY players are optimistic about receiving more incentives from the government which will propel the property sector further and among the possible incentives are a reduction of stamp duty and the further relaxation of foreign ownership to commercial properties, says HwangDBS Vickers Research. (The edge daily 23/7/07)
It said other incentives which the property players were also expecting are a revamp of the Employees Provident Fund (EPF) depositors' accounts and a reduction of real estate investment trusts' (REIT) withholding tax.
"These incentives could improve further the overall sentiment of the property sector," the research house said in a recent report on the property sector outlook.
Demand was expected to pick up, it said, based on the recent trend and incentives by the government which were changing the property industry structurally. It expected long-term positives occurring in the sector, especially the high-end segment.
The lifting of real property gains taxes (RPGT), easing of foreign ownership and speedy delivery systems were important liberal measures taken by the government to improve the attractiveness to the largely untapped foreign demand.
The government had targeted at least RM20 billion foreign ownership by 2010. Early signals such as the appreciation in prime land prices, increase in selling prices of high-end properties and high pre-sold sales indicate that properties, especially the luxury segment, are due for re-rating.
In maintaining its "overweight" call on the sector, its said financially-strong developers with strong branding and properties skewed to mid-high end were set to benefit.
"YTL Land & Development Bhd and Sunrise Bhd are our picks for the sector to ride on the property upcycle," it said.
YTL Land is the property arm of YTL Corporation Bhd, a conglomerate with businesses in utilities, construction, cement, technology, hotels and resorts.
YTL Land's crown jewel is its 294-acre Sentul development which the research house believes is the up-and-coming address in the city.
It said Sunrise is one of Malaysia's most successful niche developers with a solid reputation for quality high-end properties. Its recently-launched projects (Solaris Mont' Kiara and 10@Mont' Kiara) with a combined gross development value (GDV) of RM1.7 billion were 85% sold to date. It has high earnings visibility with total unbilled sales of RM1.3 billion.
With the lifting of RPGT and easing of foreign ownership, the prices of high-end residential properties — especially in the prime areas of Kuala Lumpur such as Mont' Kiara, Damansara Heights, Bangsar and areas surrounding KLCC — have seen capital appreciation up to 86%.
HwangDBS Vickers Research said in anticipation of better demand, developers have increased the selling prices of unsold units and new projects to as high as 100%.
A case in point is the revised selling price of The Binjai by KLCC Holdings to RM2,000 psf as compared to the launch price of RM1,000 psf in 2006 which was already the benchmark pricing.
The upcoming The Four Seasons is said to be priced at RM2,000 psf as well. The price increase is also evident in prime land prices, it said "We gather that a piece of land near Jalan Kia Peng (within KLCC vicinity) was sold at more than RM1,300 psf which was more than 30% higher than a recent transaction. YNH Property Bhd is said to ask for RM1,500 psf for its land in Jalan Sultan Ismail.
On the government's initiatives to attract foreign buyers, the earmarking of a 467-acre public park near the exclusive Damansara area and the proposed matching RM50 million fund for overseas promotions indicate strong commitment from the government to attract foreign buyers.
"We believe that the early beneficiaries of the anticipated increase of foreign uptake will be Kuala Lumpur and Penang with ready infrastructure, entertainment and natural attractions," it said.
HwangDBS Vickers Research with the relaxation of FIC requirements, removal of the cap on number of loans by foreigners and lifting of RPGT, Malaysian properties offer a very attractive value proposition to investors and homeowners.
"Nowhere in Asia offers such an affordable and yet with low downpayments (5% as compared to as high as 90% in Indonesia) to own properties than in Malaysia. We see the convergence of capital value of Malaysia properties with the regional peers after the liberal moves by the government," it said.
However, it said the long conveyancing transaction in Malaysia was still a concern to investors. Malaysia is placed at tier 2 in the Jones Lang La Salle transparency index because of conveyancing problems. For instance, it takes more than five months to register a property in Malaysia compared to a maximum nine days in Singapore.
"We think it is imperative for the government to improve the conveyancing system to transform Malaysia into an international property hub. Other than the conveyancing system, the delivery system (which includes financing and transfers that are usually arranged by developers) for real estate in Malaysia is among the most efficient and complete in the region," it said.
HwangDBS Vickers Research said it would make sense for the government to reduce the bureaucracy in the conveyancing system or introduce a scripless system.
On the local purchasers, it said it would continue to be strong as properties were still very attractive as compared to other asset classes. The demand, especially the high-end segment, was expected to be strong with rising affluence.
"The excess liquidity has more than doubled to about RM250 billion in 1Q2007. The average yield of prime condominiums in KLCC/Mont' Kiara area is comparable to junk bond yields in Malaysia currently which we believe is not justifiable with real estate being a superior asset class. Hence, we see further yield compression (capital appreciation) happening," it added.
