Tough year ahead for property sector, says JF Apex Securities

KUALA LUMPUR (Jan 5): JF Apex Securities Research said it envisages another tough year for the property sector as empirical evidence suggests that developers had experienced slowdown in their new sales since 2H14 with no signs of pre-Goods and Services Tax (GST) rush and relaxation of tightening lending.

In a nore Jan 5, the research house said it expects the property market to slowdown moderately across the board in Klang Valley, Penang and Johor for all types of residential properties but no major slump mainly due to: a) challenging economic outlook in relation to tumble of commodity prices; b) stringent mortgage approval; c) property cooling measures announced earlier (removal of DIBS, RPGT hike and LTV ratio of 70% for third housing onwards); and d) buyers will adopt ‘wait-and-see’ approach due to uncertainty upon implementation of GST.

“Thus, we expect the property transaction to decline about 10%, whilst house price to be flattish or slightly trend higher by 3-5% upon implementation of GST on building material,” it said.

JF Apex Research said empirical evidence suggests that developers had experienced slowdown in their new sales since 3Q14 with no signs of pre-GST rush and relaxation of tightening lending during year end (loan rejection rate as high as 30-40%).

It said smaller players with limited product offerings and locality might have difficulty to achieve their initial targeted new sales for 2014-15.

“Moving forward, the new launches from developers will be fewer amid of weak consumer sentiment and more product offerings in the market will be focusing on medium cost housing, with smaller built-up sizes yet stubbornly high average selling price psf, aiming for genuine demand.

“Having said that, we may see the prelude of declining unbilled sales which are in tandem with new sales for 2015,” it said.  

Furthermore, the research house said developers’ operating margins may be eroded in considering of some provision of GST incurred for their construction works/marketing expenses/building materials and selling of commercial properties which are subject to GST.

JF Apex Research maintained its “Marketweight” rating on the property sector and downgraded Tambun Indah Land and A & M Realty Bhd Bhd to “Hold” (from Buy) respectively.

The reserch house maintained its Hold rating on IJM Land Holdings Bhd.