Property buyers to return in 1H14, says CIMB

KUALA LUMPUR: While it believes buying appetite will return to the real estate market in the first half of next year (1H14), CIMB Research continues to be cautious on commercial properties given the existing glut in office space.

CIMB Research analyst Terence Wong said in a report that occupancy for commercial properties in the Klang Valley stood at around 80%. “The situation can deteriorate if significant new supplies come onstream, particularly with the development of numerous mega projects by the government.”

Wong said the harsh measures introduced in Budget 2014 to curb speculation in the property market have caused buyers to take a pause. However, he expects the buying appetite to return in 1H14 on the back of robust demand for residential properties, amid concerns of inflationary pressure from the implementation of the goods and services tax (GST).

The impact of the policy changes by the authorities, though negative in the short term, should be positive over the longer term, as they will help remove froth from segments of the market, he said.

In July, Bank Negara Malaysia capped the maximum housing loan tenure to 35 years instead of 45 years.

Under Budget 2014, the government also raised the real property gains tax and put a stop to the developers’ interest bearing scheme (DIBS). It also increased the minimum purchase price of properties for foreigners from RM500,000 to RM1 million.

“We believe that buying interest should progressively return in 1H14 as potential house buyers come to the realisation that property prices are unlikely to fall and that potential inflationary pressure from the implementation of the GST in April 2015 could push up property prices further.”

According to CIMB Research, buying interest should progressively return in 1H14 as potential house buyers come to the realisation that property prices are unlikely to fall.

CIMB Research has maintained its “overweight” call on the property sector, picking Mah Sing Group Bhd as its preferred property counter, as well as UEM Sunrise Bhd for having the best exposure to Iskandar Malaysia in Johor.

The research firm changed its rating on Mah Sing from “outperform” to “add”.

“Mah Sing remains our top pick for the property sector, with its robust earnings growth, strong sales and active land banking being the potential rerating catalysts,” said Wong.

He said despite the property cooling measures, Mah Sing’s sales should sustain in the fourth quarter of its financial year 2013 ending Dec 31 as its new flagship township, the RM5.13 billion Southville project in Bangi, has already been launched and is enjoying strong interest.

“We believe that Mah Sing will be able to weather any slowdown well as most of its projects do not offer DIBS.”

Wong added that the company should be able to achieve its financial target as its landbanking efforts in 2013 have been strong. During the year, it acquired five pieces of land (three in the Klang Valley and one each in Johor and Sabah) costing RM841 million, with potential gross development value of RM8.9 billion.


This article first appeared in The Edge Financial Daily, on December 12, 2013.