Published: Thursday October 17, 2013 MYT 9:11:00 AM
Updated: Thursday October 17, 2013 MYT 9:13:19 AM
KUALA LUMPUR: Affin Research has downgraded the property sector to Neutral from Overweight as the rising policy risks, subsidy rationalisation and higher incoming property supply will lower the broad property take-up rate and slowdown developers’ property sales.
In a note on Thursday, Affin said it has lowered the target prices of all the developers under its coverage.
“All in, we have downgraded Tropicana and UOA to Adds from Buy due to the lower upside potential to our revised target prices.
“Our top picks for the sector are IJM Land (Buy, TP RM3.20) for its good geographical diversification, strong focus in mass housing/ township developments and KSL (Buy, TP RM2.60) for its undemanding valuation,” it noted.
Affin added in view of the rising property prices, high household debts and the government’s need to increase its revenue collection, it believes the government may implement more property cooling measures during Budget 2014 and/or in first half 2014.
“These may include a hike in RPGT, possibly by 10% to 15%, to 20% or 30%; also a 50% chance of an increase in stamp duty on certain property transactions for example purchase by foreigners, purchase of third property and curbing of DIBS or rebates.
“However, we believe the curbing of DIBS will probably be announced off budget in first half 2014. The Johor state government is already mulling to impose a 4% to 5% property tax on foreign buyers, of which implementation could be in fourth quarter 2013 or early 2014,” it said.
Affin said its economists expects the Budget 2014 to focus on fiscal consolidation and reform.
“Possible measures include the announcement of GST, gradual subsidy reduction on petrol, diesel, flour, sugar, electricity, and new policy measures aimed to boost investment and increase BR1M assistance to low income group,” it said.
It added subsidy reduction will lower disposable income and deter property purchase. Higher investment activities, on the other hand, will have a long-term positive spillover to the property sector.
“We believe the current property market bull cycle could have peaked as some of the demand drivers could slowdown such as the possible tightening in policies, mortgage rates and strong recovery in housing supply, which would lead to lower overall take-up rates and limiting property price gains,” it said.
Affin expects a moderation in 2014 as factors such as demographics, economic conditions and high employment are still intact.
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