Basically the CLSA has turned cautious on the outlook of the property market based on some negative and positive signals that have fogged the market direction going forward.
Based on Kuala Lumpur Property Index (KLPRP) against year-on-year (y-o-y) growth of residential loan approval for each quarter, CLSA saw a positive correlation for the period 2003 till second quarter of 2009.
“But, such relationship seemed to have broken down since then, as the continued surge of residential loan approval till the fourth quarter of 2009 was not reflected in the performance of the KLPRP index.
“KLPRP index remained subdued till second quarter of last year, before rising at 40% to the current level,” said CLSA in a property sector report yesterday.
CLSA believed this could be a delayed reaction to the surge of loan approval as market might be sceptical with the economy recovery from the unprecedented global economic crisis.
“If this was the case, it could possibly mean that the market could potentially react to the declining growth rate of the loan approval, which is signalling to us of potential downward trajectory of KLPRP index,” it said.
On the bright side, CLSA highlighted that the Malaysian property index had outperformed the KLCI index in 2010 and first half of this year by 11.3% and 3.8% respectively.
“This is supported by consistent y-o-y house price growth of 6% to 8% in each quarter since since fourth quarter of 2009, for a consecutive of six quarters.
“It is important to note that we have not witnessed such persistent strong growth in price in the last 10 years, and such price trend did explain the outperformance of the KLPRP index,” it said.
Although still in proposal stage, CLSA also touched on the potential change in government policy which was studying the possibility of computing household loans based on net income rather than gross income.
“But, the impact of the proposed change is more significant for the higher income group due to higher marginal tax rate.
“For example, a person who can previously afford to buy a residential property that is worth RM1mil, would only be able to afford a property that is 20% lower value at RM800,000 with the proposed change,” it said.
Nevertheless, CLSA said it was important to note that only 2% of the total transaction volumes carried out in 2010 was related to property value higher than RM1mil.
“The bulk of the transactions still related to property valued at less than RM200,000, which accounted for 70% of total transactions in 2010,” it said.
By The Star
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