KUALA LUMPUR (Oct 15): Any introduction of new taxes — such as the inheritance tax and capital gain tax — could weigh on house buyers and investor sentiment, further impacting the property sector which has already been plagued by affordability and strict lending issues, according to TA Securities.

In a sector note released this morning, TA’s anaylst Thiam Chiann Wen said while the upcoming national budget may contain elements that makes home ownership and financing easier for the people, there is unlikely any form of relaxation nor withdrawal of property-cooling measures in the near-term.

“We do not expect any harsh cooling measures to be announced in the upcoming budget, as earlier measures have started to soften growth in the nation's property prices,” Thiam wrote in the note.

The analyst said this is because any unwinding of cooling measures may not be viewed as rakyat-friendly, as it may attract the return of speculators and thus crowd-out genuine home buyers.

“However, any introduction of new taxes such as inheritance tax, capital gain tax, etc, whilst [there is] no direct implication to the local property market, could weigh on house buyers' and investors' sentiment. This does not bode well for the property market, as the sector has already been impacted by affordability issue and strict lending,” she wrote.

While Budget 2019 is expected to see some new tax measures, Thiam foresees taxes targeting foreign buyers — in the form of higher buyer’s stamp duty for foreigners buying properties in Malaysia — instead of targeting at the already weak property market.

In view of the “difficult budget” as warned by finance minister Lim Guan Eng, TA Securities has downgraded valuations on property stocks under its coverage, lowering target prices for all its counters.

Following the cut in its target price-earnings and price-to-book multiples, Ibraco Bhd, Glomac Bhd and Hua Yang Bhd have been downgraded to “Sell”, from “Hold” previously. 

Meanwhile, SP Setia Bhd and IOI Properties Group Bhd are upgraded to “Buy”, from “Hold”, after recent correction in share prices.

“While lowering target prices for all the counters under our coverage, we maintain our ‘Neutral’ stance on the sector, as we believe the potential downside risks have already been reflected in the recent fall in share prices,” Thiam added.

The Kuala Lumpur Property Index has declined 10% over the past month, versus a 4% decline in the benchmark KLCI index. theedgemarkets.com

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