Kenanga Investment Bank’s research division (Kenanga Research) thinks that first-time home buyers in Malaysia may defer their purchases until property developers really start reducing the price of the homes they’re selling by at least 10 percent, reported The Borneo Post.
It said this in response to the tabling of Budget 2019 on Friday (2 November), under which the federal government plans to waive all stamp duty charges for first-time purchases of residential properties costing from RM300,001 to RM1 million for six months only starting from 1 January 2019.
Finance Minister Lim Guan Eng said the aim of this move, which is as part of Putrajaya’s National Home Ownership Campaign, is to help tackle the large number of unsold homes, which has surged by 65 percent from RM13.3 billion in 2017 to RM22 billion as of 31 March 2018.
But in return for the stamp duty exemption, property developers need to reduce the prices of these dwellings by a minimum of 10 percent.
Kenanga Research said the move will help home builders clear their unsold stock. While it will also impact their profit margins, many developers have been focusing on disposing their inventory this year even if leads to lower margins.
“Interestingly, many players do offer to absorb some stamp duty charges currently, so the impact may not be as strong as expected,” it noted.
However, it is concerned that the federal government’s offer to provide stamp duty exemption in return for price discounts to first-time home buyers could lead to slower sales in Q4 2018, as many people could time their deals to take advantage of this or until firms really start slashing their prices.
“We are now concerned that first-time home buyers may hold back purchases till they see the full 10 percent house price reduction.” But Kenanga Research is not sure if this move can help first-timers secure adequate loan-to-value (LTV) from banks.
On the federal government’s other move for first-time buyers purchasing homes costing up to RM500,000 that will exempt them from paying stamp duty for up to RM300,000 on the sale and purchase agreements plus mortgage agreements for two years until December 2020, it said this will greatly benefit Mah Sing Group and Hua Yang given their unit mix.
“We believe this measure helps increase the odds of them achieving their sales targets although margins are likely to remain challenging due to earlier reasons mentioned,” added Kenanga Research.
Image source: Borneo Post Online
This article was edited by the editorial team of PropertyGuru. To contact them about this or other stories email editorialteam@propertyguru.com.my
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