Following UBS Research’s bullish call on the property sector on June 19, HwangDBS Research yesterday also upgraded its call on the sector, on the back of potential positive policy changes to lift the sector, sales bottoming out, attractive incentive schemes and the resumption of new launches.
Since end-2006, the Government has been liberalising the sector to attract foreign direct investments and boost demand.
“The Government is currently reviewing the Foreign Investment Committee (FIC) guidelines, and Najib is expected to make significant announcements at the Invest Malaysia conference. This could further re-rate the sector, which is already seeing sales bottoming out,” said HwangDBS Research property analyst Yee Mee Hui.
She said possible changes included curtailing the FIC’s role to monitoring only six areas of “national interest”, while other sectors would be placed under the respective ministries with clear investment criteria on their website.
This could help speed up the investment process as FIC approvals typically take one to three months versus no such requirement in other international property markets.
Other possible measures include easing FIC requirements relating to commercial properties and developers, the standardisation of bumiputra policies for consistency and transparency, easing local ownership requirements for retail and trade as well as liberalisation to help improve perceived investibility.
These measures could lead to a narrower pricing gap between Malaysian and regional properties (which are at present priced at more than a 90% discount compared with Singapore and Hong Kong), and improved liquidity with increased participation from international investors.
“Malaysian property is attractive as foreigners are allowed to own freehold landed properties, compared with regional markets which only permit foreigners to own leasehold land of short tenures,” said Yee.
Owing to the warm response to recent launches, Yee understands that more developers are planning to launch high-end properties in Kuala Lumpur and Penang in the second half of 2009.
“Developers could start raising prices again. Present buyers of properties are predominantly locals acquiring for own use. The return of foreign investors should provide a strong boost for property sales and prices,” she said.
Yee noted that Malaysia had yet to see a strong rebound in property sales compared with regional markets like Singapore and Hong Kong.
Her top big-cap picks include SP Setia Bhd, while mid-caps include Eastern & Oriental Bhd, Sunrise Bhd and Sunway City Bhd.
However, industry observers pointed out that some of the administrative bottlenecks relating to property transactions are at the state government level because land is a state matter.
It is worth noting that at Invest Malaysia 2007, key liberalisation measures announced were related to the property sector.
Significant measures included the exemption of real property gains tax for both residents and non-residents effective April 1, 2007.
Foreigners were also allowed to purchase residential properties above RM250,000 each without FIC approval.
There was also a series of incentives to attract investors to Iskandar Malaysia which included tax holidays and exemptions.
By The Star (by Tee Lin Say)
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