Incentives introduced under the fourth Covid-19 stimulus package, dubbed Penjana, will help boost investor sentiment towards the property sector.

Nevertheless, analysts in general remain largely neutral on the sector, citing subdued prospects due to the challenging economic outlook.

For instance, CGS-CIMB Research said it expected the property sector to trade higher in the short term due to the “feel-good factor” from the positive measures announced.

“However, we stay sector neutral given the weak macro outlook, affordability issues and expected lower property sales, even though the KL Property Index is currently trading at 0.4 times price-to-book-value (P/BV), which is around two standard deviation below its historical 10-year valuation of 0.75 times P/BV, ” the brokerage said in a note.

TA Research pointed out that the measures introduced under the recently unveiled short-term economic recovery plan were “wishes come true” for the property sector.

“Developers’ wishes have finally come true with the government announcing the Home Ownership Campaign (HOC) 2020, along with real property gains tax (RPGT) exemption and removal of 70% loan-to-value (LTV) ratio on third housing loan, ” the brokerage wrote in its report.

“Home buyers and investors are expected to be the biggest beneficiary from Penjana, as measures unveiled would help to reduce their entry and exit cost.

“We believe all private developers will also benefit from Penjana, as the measures should help absorb developers’ unsold stocks and boost sales of new property launches, ” it said.

TA Research noted that while the current accommodative interest-rate environment would continue to bode well for the housing market, it reckoned the loosening policy alone would unlikely revive the overall housing market.

This is because weak consumer sentiment and stringent lending practices remained key reasons for the lacklustre property sales.

It maintained its “neutral” stance on the property sector.

“Although we believe property buying interest will increase with Penjana incentives, the property sector outlook remained clouded by key challenges such as uncertainty of Covid-19 containment, the gloomy economic outlook, cautious spending due to job loss anxiety, unresolved overhang issues and strict lending policy, ” TA Research said.

“Depending on the effectiveness of the government’s efforts on restoring businesses and employment, increasing people’s purchasing power as well as discovering new economic opportunities, we expect a gradual recovery in the second half of 2021, ” it added.

Last Friday, the government unveiled several positive measures for the property sector under Penjana.

The HOC, which would run from June 1,2020, to May 31,2021, would see the implementation of a minimum 10% discount on residential properties, stamp duty waiver of up to RM1mil on instruments of transfer for properties priced between RM300,000 and RM2.5mil, and stamp duty waiver of up to RM2.5mil on loan agreements for properties priced between RM300,000 and RM2.5mil.

The RPGT exemption for individuals would be effective June 1,2020 to Dec 31,2021. This would be limited to disposal of three units of residential homes per person. The removal of 70% LVT ratio on third housing loan was for property priced RM600,000 and above.

“We believe these measures are positive for developers but the impact could be largely mitigated by an anticipated contraction in Malaysia’s gross domestic product and potentially higher unemployment rate due to disruption from the Covid-19 outbreak, ” CGS-CIMB said.

“It remains uncertain whether people will purchase big-ticket items during challenging times despite incentives given and low interest rates (2%), as property prices have more than doubled from 2009, ” it added.

Meanwhile, Public Investment Bank Research (Public Invest) said it remained “neutral” on the measures announced for the property sector under Penjana.

“We believe that in the short term, stresses due to the slowing economy could take centre stage with recovery longer than expected owing to the potential hike in unemployment that could deter big-ticket buying such as properties, ” it said.

“While the tax reliefs are positive, consumer sentiment is still scarred by the Covid-19 pandemic and impact from the movement control order, ” it noted.

In addition, Public Invest said the ongoing political uncertainties and high property overhang could also dampen property demand albeit the undemanding valuations. Hence, it maintained its “neutral” call on the sector.

Source: TheStar.com.my

The number and value of residential property transactions in Penang are projected to decline between 50% and 60% in the second quarter of 2020 from the preceding first quarter.

“We project a 50%-60% drop from the first quarter because the property market went into a silent mode after the movement control order was implemented in March.

“Most of the transactions happened in January and February, ” Raine & Horne Malaysia director Michael Geh (pic) said.

According to Napic statistics, in the first quarter the number and value of transactions for Penang stood at 2,748 and RM1.06bil.

On the island, depending on location, the current price of high-rise residential properties is 5% to 10% lower than in 2019.

“After the moratorium on the repayment of housing interest, we expect a further drop of 5% to 10%.

“We are not seeing a rush to sell properties because of the freeze on the repayment of housing interest, ” he said.

According to Geh, the cash incentives offered to promote the sales of housing projects in the primary market for the last 12 months had impacted the secondary market.

“The sales in the secondary market have contracted by about 30% as a result, ” he said.

On oversupply, Geh said: “The overhang of residential properties in Penang in 2019 was 3,353 units, compared to 3,445 in 2018.

“Some 35% of the overhang residential properties are priced between RM500,000 and RM1mil.

“About 25% are those priced between RM300,000 to RM500,000, while another 22% are priced above RM1mil, ” Geh added.

However, there is a surge of interest for the rental market.

“We can see more interest to rent than to purchase for the past 12 months, which may have to do with the difficulty of obtaining a housing loan.

“So far, the interest in rental has yet to trigger an increase in rentals.

“For shopping lots in a mall, the rentals have been lowered by 20% to 30% to retain existing tenants whose business have been affected by the virus outbreak, ” he added.

Geh said he could not see beyond the second quarter.

“When will the country open up its borders again? Until it opens up, the interests shown by overseas buyers for the residential properties would not translate into sales.

“We have seen healthy interests from overseas buyers because of the weakened ringgit, which has made the local properties even more attractive.

“The demand from the local market might be dampened due to the increase in unemployment in the near future.

“Many companies have just started to resume operations and will be reassessing their human resources needs soon.

“This means they could embark on retrenchment exercises to clear excess head-counts because of the business environment.

“Because many parts of the globe are still in lockdown, we can see companies in the manufacturing sector not taking in new employees. Therefore, we can expect the demand for affordable housing in Penang to be weak, ” he said.

On the federal government’s decision to waive the real property gain tax (RPGT) from June 1,2020 to Dec 31,2021 and restart the national home-ownership campaign, Geh said these measure were welcome and should have a positive impact on the property market. “The RPGT waiver will jump-start the property market, ” he said.

Source: TheStar.com.my

About The Zen

A mixed development by Asia Green at Bayan Mutiara. It is located next to Tun Dr. Lim Chong Eu Expressway, just a short drive away from the ongoing Penang World City township development by Tropicana Ivory. This development comprises a 46-storey skyscraper with two residential towers, and shop offices located at lower level. The residential component will feature 1,200 affordable units and 730 bigger open market units.

Find out more about The Zen development

A newly proposed residential development by Welcome Development Sdn. Bhd. at Bukit Mertajam. Strategically located at the intersection of Jalan Song Ban Kheng and Jalan Kota Permai, diagonally opposite Spectrum Residence by Zuwen Bina. It is only a 5 minutes walk to SJKC Beng Teik Chinese primary school, surrounded by various amenities which include banks, markets, eateries, petrol stations and others.

This development comprises one block of 9-storey apartment, featuring 60 units of low cost and 10 units of medium cost apartment. The low cost and medium cost apartment as a standard built-up size of 650 sq.ft. and 1,000 sq.ft. respectively.

The project is still pending for approval. More details to be available upon official launch.

Project Name: (to be confirmed)
Location : Bukit Mertjaam
Property Type : Apartment
Total Unit: 70
Built-up Area: 650 sq.ft. (low-cost), 1,000 sq.ft. (medium cost)
Indicative Price: (to be confirmed)
Developer: Welcome Development Sdn. Bhd.

Location Map:

The National Economic Recovery Plan (PENJANA) incentives announced on Friday are expected to heighten property buying activities in the next few months.

ExaStrata Solutions Sdn Bhd’s chief real estate consultant and chief executive officer, Sr Adzman Shah Mohd Ariffin, said the stamp duty exemption under the revived Home Ownership Campaign (HOC) would certainly boost the sales of new residential properties priced no more than RM2.5 milion.

“On top of that, developers are required to give a 10% discount on the prices (to qualify for the exemption). This incentive is further enhanced by the lifting of the 70% margin of financing limit for the third housing loan onwards (for properties valued at RM600,000 and above).

“The current low bank lending rate will also help to encourage more buyers to start buying properties provided that that they can qualify for a loan,” he told Bernama.

He added that this really depended on how the banks’ own restrictions were going to be loosened up for the would-be purchasers to qualify.

On the real property gains tax (RPGT) exemption, Adzman said this would encourage owners to dispose of residential homes during the period of June 1, 2020, to Dec 31, 2021.

“However, this may result in the sub-sale market competing with the sale of developers’ unsold housing stock.

“Nevertheless, this will help the owners who need to liquidate due to financial woes to gain more since the RPGT will be exempted,” he said.

Meanwhile, Elvin Fernandez, managing director of valuer and property consultancy Khong & Jaafar Sdn Bhd, said the big issue in the Malaysian property market — “the elephant in the room” — was the substantial oversupply of properties, be it residential or commercial.

“In the residential sector, the underlying fundamentals are stronger mainly because the vast majority of owners are owner occupiers who would not be easily shaken even with the severe downturn in the economy we are now facing.

“The owner of residential properties who are not desperate will hang on and not sell their houses at distressed prices,” he said.

On the other hand, in the commercial space like office buildings and retail centres, the oversupply had greater consequences, Fernandez said.

“To rebalance the various sectors of the property market will need a deeper and more holistic study and appropriate measures taken to make the property market more efficient and supportive of the economy in general,” he highlighted.

As for the incentives announced, he viewed the HOC as good in the sense that it might help to clear some of the oversupply in the residential sub-sector while the stamp duty exemptions were also welcome.

“The RPGT relief is good but it is only for residential properties and not as extensive as expected, especially on the RPGT after five years.

“The uplifting of the 70% margin of financing limit is also a very good move, as the banks should be allowed to assess their risks,” he added.

Source: Bernama