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Thursday, March 20, 2014

Housing market to taper off

The Malaysian Reserve | March 17, 2014

By Farah Adilla

KUALA LUMPUR: The residential property market is expected to taper off in the first-half of 2014 (1H14) following various cooling measures introduced by the government, stricter bank lending guidelines and new price thresholds for foreign ownership, according to a research report by KFH Research Ltd.

However, the research house said the market is expected to pick up before Goods and Services Tax (GST) kicks off in April 2015.

“We think that the segment of high-rise properties will face more severe impact while landed properties, which is driven by genuine occupational demand, will see limited impact.

“We gather that a lot of developers have deferred their new launches and revised down their internal sales target in 2014 in view of impending implementation of cooling measures.

“We also observed that many developers were in the final push for sales the last quarter of 2013 in view of impending implementation of new measures in 2014,” the report said.

Some measures introduced during the government’s Budget 2014 include the increase of Real Property Gains Tax (RPGT) to 30% for gains on properties disposed of within the holding period of up to three years. For disposals within the holding period of up to four and five years, the rates are decreased to 20% and 15% respectively.

The government also introduced a new minimum price for property that can be purchased by foreigners to RM1 million from RM500,000.

Meanwhile, CIMB Research said the impact of the new policy on the property market, which is going to be negative in the short-term, should be positive over the longer-term as it will help remove froth from some segments in the market.

“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 pressures from the implementation of the GST in April 2015 could push up property prices further.

“Strong sales by developers will, in turn, help to rerate property stocks,” CIMB Research said in a report published on Dec 10, last year.

KFH Research added that despite the slowdown in price growth and sales volume, it is unlikely to be for long as in the past.

“Typically, we will see some marginal weakness in two to three quarters following announcement of a hike in RPGT and subsequently sales will normalise,” KFH Research said. KFH Research said the key long-term driver for the sector, young population, is still intact.

“As long as the number of households is increasing, demand for younger families or couples seeking new homes is always there.

In the Klang Valley, strong demand is seen among young buyers for landed houses priced between RM600,000 and RM800,000 as well as high-rise properties priced around RM500,000.

“The run-up in property prices during recent years suggests that a forced shift of demand to more affordable housing or properties located in suburban and fringe areas will take place.

“In fact, some developers are switching their focus to affordable housing or fringe areas instead of launching high-end properties,” it added.

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