Rerating of property sector justified
“We do not anticipate any new dramatic tightening policies, as this would derail the recovery of the property sector.” TA Securities Research
PETALING JAYA: Budget 2022 will likely contain elements that make home ownership and financing more accessible, according to TA Securities Research.
“Following the full reopening of all economic sectors this month, we expect that better market sentiment along with stronger recovery in economic and business activity to contribute to better developers’ sales prospects ahead, which will eventually translate into stronger earnings going forward,” said the research unit.
TA Securities Research maintained its “overweight” rating on the property sector, and said a rerating is justified, considering developers’ encouraging sales growth and attractive valuations.
“We do not anticipate any new dramatic tightening policies, as this would derail the recovery of the property sector,” it said.
Taking a cue from the recently announced 12th Malaysia Plan (12MP), it also opined that Budget 2022 would primarily focus on ensuring adequate, quality, and affordable housing, improving the living standard of poor households and monitoring and evaluating efforts as well as achieving urban sustainability.
It is anticipated that the focus of Budget 2022 would be to ease the burden of the B40 and M40 as their livelihood was largely affected by the Covid-19 pandemic.
Also, Budget 2022 should be primarily helpful to low-to-middle-income earners as well as to first-time home owners.
TA Securities Research is also hopeful for more measures to ease the burden of property owners by extending the real property gains tax (RPGT) exemptions along with lower RPGT rates.
Based on its channel checks, it said property developers’ wish lists and expectations for Budget 2022 include promoting homeownership among the low-to-middle income group, reiterating and broadening existing public housing schemes, making home ownership and financing easier, extending the Home Ownership Campaign to 2022, and a tax relief for mortgage interest.
Property developers are hoped for incentives such as a relaxation of requirements for the Malaysia My Second Home (MM2H) programme.
Despite the fact that the MM2H programme only accounts for a fraction of the overall number of homebuyers in Malaysia, it can nonetheless contribute to reducing the overhang of unsold properties.
“We note the recent adjustments to the MM2H programme criteria for new applicants could be extremely stringent, discouraging foreigners from settling and working in Malaysia,” said TA Securities Research.
Additional incentives are needed to promote green development in Malaysia and to encourage developers to adopt accredited green certification tools during the construction and operation phases of development projects.
The government should grant additional tax incentives to developers of green-certified buildings, allowing them to claim income tax deductions equal to the additional capital expenditure required to obtain green certification.
On top of that, the government may consider offering stamp duty exemptions to purchasers who acquire properties that have been certified as environmentally friendly in order to stimulate demand.
“This is primarily to address the higher cost of green building construction in comparison to conventional buildings, which may deter potential buyers from making the investment,” said TA Securities Research.
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Summary Forecast Stats Download
Government Budget in Malaysia increased to -3.20 percent of GDP in 2020 from -3.40 percent of GDP in 2019. source: Ministry of Finance Malaysia
| Malaysia | Last | Unit | Reference | Previous | Highest | Lowest |
|---|---|---|---|---|---|---|
| Government Budget | -3.20 | percent of GDP | Dec/20 | -3.40 | 2.40 | -6.70 |
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