RHB Research Institute Sdn Bhd is maintaining its overweight stance on the property sector with expectations for the price of property stocks to increase.

'We believe once the regulatory risk is cleared (pending announcement from the authority) and if the new measures are in line with our expectations, we see the strong potential for property stocks to outperform going forward,' it said in a
research note today.

The research house believes that there are still strong catalysts to drive demand for properties. They include faster growing of youngster to drive big-tickets purchase, low mortgage rate, aggressive promotions by developers and strengthening ringgit.

It said the strengthening ringgit was likely to attract higher foreigners' participation in the Malaysia property market due to higher expected return from investment.

'We note that over the past few months, some foreign-based funds have also acquired properties in Malaysia -- AEON Melaka Mall and 1 Mont' Kiara, showing increasing interests in Malaysian properties,' it said.

Apart from the fundamental drivers from demand, other supporting factors that sustain property prices include increasing land replacement costs.

'As developers continue to replenish their landbank, land replacement costs will become higher, partially due also to the competitive biddings.

'Hence, even though building materials prices have remained stable thus far, property prices in the primary market are likely to sustain at high levels even if developers maintain their margins,' it added.

RHB Research believes that the new regulatory measures will not hurt the property sector but could reduce some speculative activities due to lower leverage ability.

'We think the overall impact on the property sector would be moderate as young populations are typically the first or second home owners and buyers who own more than two homes are generally the affluent group,' it said.

Based on its analysis on the relationship between young population growth and Average Residential Property Price, RHB Research believes that the property price will continue to increase over the next two years. -- Bernama