Property sales bottoming, says HwangDBS

KUALA LUMPUR: Property sales are already showing early signs of bottoming out due to attractive mortgage rates and incentives offered by developers, improving risk appetite and recent share market rally, said a research house.

HwangDBS Vickers Research said in a report that after a steep 6.2% gross domestic product (GDP) contraction in the first quarter 2009 (1Q09), the worst was now past. Headline GDP growth numbers should rise gradually, reflecting the underlying improvement in the domestic economy as well as the broader external economic environment.

It said the second and third quarters of 2009 should see narrower contractions (-5.6% and -4.3% year-on-year), before a turnaround in 4Q09 of 0.2% which should continue into 2010.

The research house said the recent strong market rally saw KLCI market capitalisation increase by 33% or RM161 billion, adding that commodities such as crude palm oil had risen by 30% to RM2,233 per tonne over the last three months.

“All these newfound wealth could very well find its way into the property sector, as seen in the past. Property sales have a strong correlation to stock market performance (+0.6 times),” HwangDBS said.

The research house said since end-2006, the government had been liberalising the property sector to attract FDIs and boost base demand. This includes the removal recently of the bumiputera equity requirement for 27 service sub-sectors.

HwangDBS said the current review of the Foreign Investment Committee’s (FIC) guidelines together with the expected significant announcement by the prime minister at “Invest Malaysia 2009” could further re-rate the sector that was already seeing sales bottoming out.

It noted that prime commercial asset owners and projects with international appeal would be the biggest potential beneficiaries should FIC requirements be eased for commercial properties and developers.

It said developers such as KLCC Property Holdings Bhd and Malaysian Resources Corporation Bhd, the largest landowner at the transportation hub in KL Sentral, were set to gain from such a move.

Projects with international appeal, the research house said, included Seri Tanjung Pinang in Penang and Nusajaya in Iskandar Malaysia.

By The EDGE Malaysia (by Yong Min Wei)