CIMB Research maintains Overweight on Malaysian property sector

Published: Friday January 3, 2014 MYT 8:36:00 AM 

Updated: Friday January 3, 2014 MYT 8:38:30 AM

KUALA LUMPUR: CIMB Equity Research remains Overweight on the property sector and the recent weakness in property stocks should provide investors with good entry points.

The research house said on Friday Mah Sing remains its preferred pick while UEM Sunrise still offers the best exposure to Iskandar Malaysia.

“The property sector was one of the best performing sectors in 2013, despite share-price pullbacks in August along with the broader market on Fed-tapering concerns and further

pullbacks after the announcement of the 2014 Budget in October,” it said.

CIMB Research said property developers with exposure to Iskandar Malaysia were in vogue earlier in the year when newsflow was strong.

“While a significant portion of the gains was given up in 4Q, the KL Property Index ended the year up a firm 23%,” it said.

The research house said due to the strong house-price appreciation in recent years, there had been numerous calls for the government to clamp down on speculation.

In July, the central bank capped the maximum housing loan tenure at 35 years, from 45 previously. In October, the Ministry of Finance raised the real property gains tax significantly and abolished the developers' interest bearing (DIBS) scheme. It also raised the minimum purchase price for foreigners from RM500,000 to RM1mil.

“As these macro prudential and policy measures are meant to curb speculation and not restrain genuine demand, the impact (though negative in the short term) should be positive over the longer run as they should help to remove froth from some segments of the market.

“We believe buying interest will progressively return in 1H14 as potential house buyers come to the realisation that property prices are unlikely to fall and that inflationary pressures from the implementation of the goods and services tax (GST) in April 2015 could boost property prices further.

“Also, affordability remains close to its highest ever. Robust sales by developers should provide impetus for a re-rating of property stocks,” said CIMB Research.