Property market ripe for rebound in 2021

BUYING sentiment on properties is expected to improve in anticipation of a better economic outlook in 2021.

While demand-supply rebalancing will still take some time, Maybank IB Research opined that the worst is over given homes sales may have hit bottom already and should improve year-on-year (yoy) next year.

This is in anticipation of the Malaysian economy growing +5.1% in 2021 after a -5.4% contraction in 2020, a low interest rate environment and a slew of attractive incentives offered by both the Government and developers.

“Operationally, developers are on ‘cleaner ground’ post-kitchen sinking in 2020,” noted analyst Wong Wei Sum in a property sector update.

In fact, the research house reckoned that there can also be a potential spike in property sales before end of the 2020 House Ownership Campaign (HOC).

“Property sales spiked up in May-June 2019 before the Government extended the 2019 House Ownership Campaign’s (HOC) timeline to end-December that year (from June 2019),” observed Wong.

“We reckon that the similar buying pattern may repeat and there could be rush into buying property before the end of HOC 2020 on May 31 next year, particularly for properties priced above RM500,000/unit.”

Wong further based his bullish outlook on the Government’s policy easing measures in tandem with the National Economic Recovery Plan that were unveiled in June.

They include:

  • Stamp duty exemption on the instruments of transfer and loan agreement for the purchase of residential homes priced between RM300,000 and RM2.5 mil (for primary market only) subject to at least 10% discounts provided by the developer;
  • Real property gains tax (RPGT) exemption for disposal of residential homes from June 1 to Dec 31, 2021;
  • The lifting of 70% financing margin limit (loan-to-value ratio) on third property onwards subject to the internal risk management practices of financial institutions.

Additionally, the Government has extended the stamp duty exemption on instruments of transfer and loan agreement for first time home buyers for residential properties up to RM500,000/unit until Dec 31, 2025.

These incentives, together with additional rebates/discounts offered by developers, will help to reduce upfront costs related to property purchases.

All-in, Maybank IB Research upgraded the property sector to tactical “positive” (from “neutral” based on the view that the current rock-bottom valuation of property stocks should have more than priced in the negatives (high unsold stocks of 116,504 units in 3Q 2020 versus historical average of 91,858 units between 2010-3Q 2020). – Dec 14, 2020

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