PETALING JAYA: UOB Kay Hian has downgraded the local property sector due to slower residential home sales, especially in the second half of the year, coupled with an anticipated tightening of property measures.

The research house, which downgraded the sector from “overweight” to “market weight”, said in its latest note that sales launches by property developer might had slightly dampened with average take-up rates of 50% to 65% compared with 80% to 90% a year ago.

It said there could be cooling measures on the sector, namely the re-introduction of a real property gains tax (RPGT), loan-to-value cap at 70% for second mortgage and mortgage approval criteria based on net salary.

Although these measures might not have been put in place, it added that the impact had already been felt as most of the property stocks had fallen about 10% to 25% since last month and were now trading sideways.

UOB Kay Hian noted that most companies were trading at a 10% to 20% discount to their respective revised net asset value (RNAV). Selectively, the research house said it liked property developers that could still benefit from the rollout of the Economic Transformation Programme (ETP) and positive news flow from Iskandar Malaysia.

It is maintaining its “buy” calls on MRCB (target price: RM3.02) and UEM Land (target price: RM2.68). The near-term catalysts for MRCB is the contract awards for phase 1 of River of Life and clinching parcels of RRI Land in Sg Buloh by year-end.

UEM Land, as the flagship developer of Khazanah, will continue to benefit from the land price appreciation through the materialisation of Iskandar Malaysia, which is currently very much on track, according to UOB Kay Hian.

It recently downgraded Mah Sing to “hold” with a target price of RM2.51 (10% discount to RNAV) and also maintained a “hold” on SP Setia with a target price of RM4 (10% discount to RNAV).

The research outfit is currently reviewing the target price and notes that there could be further downside if the market continues to fall, given its relative premium valuation compared with its peers.

Nevertheless, UOB Kay Hian said it expected mainstream property developers’ valuations to hover at between mean and one standard deviation (SD) above mean.

This healthy valuation range reflects the positives of a low mortgage rate environment (of 4%-5%), the ability to secure coveted federal landbank, potential merger and acquisition activities within the sector (for example,IJM Land and MRCB), and in the intermediate term, the positive spill-over to land prices from mega projects like the MRT lines and River of Life.

Most of the property companies in UOB Kay Hian’s coverage had also experienced positive changes in their business models, which justified higher above-historical valuations, it added.

Meanwhile, a property analyst at MIDF Research said it would maintain a “neutral” call on the sector this year unless there were policy changes that would impact demand for properties, like the reintroduction of the RPGT, loan-to-value cap of 70% for second homes and approval of mortgage loans based on net salaries.

He said the current low interest rate environment with the overnight policy rate maintained at 3% was still attractive and would spur demand for properties barring any unforeseen circumstances.

Source: The Star

PROPERTY developer Equine Capital Berhad is making its debut as a main sponsor for Penang Starwalk this year.

The company is sponsoring RM25,000 for the Sept 18 walk.

Its assistant general manager (sales and marketing) Josephine Lee said the company wanted to be part of the premier sporting event.

?Starwalk promotes a healthy lifestyle and we want to be a part of it,? Lee said after she and Equine senior sales and marketing executive S.C. Koot handed over the sponsorship to The Star regional operations manager (north) Chung Chok Yin and IT manager Khoo Boo Taik at Equine Home Gallery in Batu Kawan on Thursday.

Lee said the company had printed 25,000 flyers of its Callisia 2 project in Batu Kawan to be distributed to the Starwalk participants.

Penang Starwalk 2011 is jointly organised by The Star and the Penang Amateur Athletic Association.

A record number of 20,000 people have signed up for the event which will be flagged off from the Penang Times Square at 6.30am for competition walkers and 7.15am for non- competition walkers.

Those who complete the walk within two hours will be eligible for a lucky contest.

The platinum sponsor for the event is Genneva Syariah while the other main sponsors are 100Plus, AmBank, BP Diagnostic Centre, Golden Screen Cinema, Magnum, Malta, Maxis, Milo, Modenas, Nikon, One Community Worldwide, Pallas, Sunquick and Sunshine Wholesale Mart Sdn Bhd.

Penang Global Tourism is the supporting partner while Penang Times Square is the official venue provider. Rapid Penang is the official transport provider.

SOURCE: The Star

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CIMB Investment Bank Bhd research head Terence Wong said this is likely to happen over time.

"This could be continuing but not in a short time. It could happen once in a year," he said.

Investing in the property market in Penang is still a solid option.

"This is because property prices in Penang are firm and almost on par with what is being offered in the Klang Valley currently," he said.

On August 29, conglomerate Sime Darby Bhd said it was buying 30 per cent of Eastern & Oriental Bhd (E&O) for RM766 million to expand its portfolio in property development and hospitality, beyond Greater Kuala Lumpur.

Having a stake in E&O will immediately give Sime Darby access to present and future property projects in Penang.

Analysts have also said that it is cheaper to gain control of a listed company with landbank in Penang than buy large chunks of land in the island.

Three Klang-Valley based developers have already ventured into Penang and launched several properties.

IJM Land Bhd has launched it RM422 million The Light Collection I & II while SP Setia Bhd has introduced its RM60 million Brooks Residences, RM230 million Reflections condominium and semi-detached schemes for its Setia Pearl Island project.

Mah Sing has launched its the first phase of its Legenda@Southbay, for RM71 million.

SOURCE: Business Times

MORE than three years ago, my wife and I missed a chance to own our dream double-storey terrace house in Bangi. The price was about RM230,000 or RM217,000 after a 7 per cent rebate for Bumiputeras.

That house was under the first phase of a new township, whose units were snapped up within hours. A few months later, the second phase was launched, and the units under it, with slight upgrades from the previous phase, started from well over RM300,000 and were literally sold out too within hours.

I don't know exactly how the price for a more or less similar product had risen dramatically within a short span. My guts told me that it was due to a combination of the developer's reputation and quality and great demand for new houses in Bangi. Or perhaps, it's because of expectations (read speculation)?

Some observers said property rides on expectations. If people expect prices to go up in a foreseeable future, many may find out that properties will forever be out of their reach. Indeed, property prices in Malaysia have never eased during the past few years. As it stands today, the affordability ratio has gone through the roof.

A survey done by a publication on housing affordability saw property prices increasing from 5.9x income in 1989 to 10.9x in 2010. Left unchecked, it will soon climb to 15x your annual income.

It is also reported that the household debt-to-GDP (gross domestic product) ratio in the country has reached nearly 76 per cent, which is on the high side compared with our counterparts in Southeast Asia.

Hence, a proposal by Bank Negara Malaysia to change the way mortgages are calculated is excellent. It will greatly reduce the amount the public can borrow. The computation is supposed to be based on net income, and not gross income. That could reduce the amount that can be borrowed between 14 per cent and 37 per cent, according to a research house.

Certain parties can sigh and whine, but such proposal is a belated move to curb rising household debt. Yes, there could be an impact on the demand for affordable properties priced between RM100,000 and RM300,000. Yes, there could be slower take-up rate from the low- and middle-income segments that will result in the long run, slower delivery of affordable housing projects. And yes, ordinary wage earners could be affected more than the high-income segment.

But any good move to nip the household debt in the bud should be lauded. In other words, any good move to cool down soaring housing prices (and credit card loans) must be supported.

SOURCE: Business Times