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KUALA LUMPUR: Although the FBM KLCI closed almost unchanged and the ringgit strengthened to a four-month high against the US dollar yesterday to 3.1355, property stocks took a beating in the aftermath of the unveiling of Budget 2014.
The goods and services tax (GST), which will replace the sales and services tax, as well as new measures that could put a dent in the demand for properties caused many counters in the property sector to close in the red on the first day of trading since the tabling of the budget last Friday.
Save for S P Setia Bhd which closed unchanged at RM3.20, other large cap property developers saw their market values fall.
Mah Sing Group Bhd dropped six sen or 2.49% to close at RM2.35, IJM Land Bhd lost three sen or 1.06% to RM2.79, and UOA Development Bhd closed seven sen or 3.06% lower at RM2.22.
UEM Sunrise Bhd was the biggest loser of the lot, as the counter fell 10 sen or 3.85% to RM2.50 a share.
“I applaud the government for trying to curb speculative activity in the property market, but it should be more focused when coming up with these measures so as not to punish the developers and genuine homebuyers,” Glomac Bhd group managing director and CEO Datuk FD Iskandar told The Edge Financial Daily.
He said the discontinuation of the developer interest-bearing scheme (DIBS) could negatively affect property sales as the scheme was used to attract prospective homebuyers.
“Property developers do not get any financial rewards from offering DIBS to their customers. We have to make the interest payments on the buyers’ housing loans until the developments are completed. Many developers use DIBS just to encourage sales,” he said in a telephone interview.
Glomac was not spared the post-budget property stock selldown, falling three sen or 2.52% to RM1.16 yesterday
Iskandar, who had earlier said that property developers are seeing their margins shrinking, said the introduction of the GST could affect the property sector’s profitability.
“Residential property sale transactions are exempted from GST. But then these properties are built using bricks, steel and other materials on which the GST will be imposed. We can’t pass our higher costs to consumers,” he said.
He hopes the government would have more dialogues with property developers on how to improve on these new measures.
“More than half of the loans given out by banks last year were for the purchase of properties, according to Bank Negara [Malaysia]. If sales of properties are affected going forward, this would be bad for the bigger picture,” he said.
Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew said he believes these new measures, along with the increase in the real property gains tax to 30%, would have an impact on the property sector.
“The question now is how much these measures will affect the property sector going forward,” he said.
This article first appeared in The Edge Financial Daily, on October 29, 2013.
