PM announced on 15 July that first time homebuyers will enjoy a 100% stamp duty exemption for property priced at <RM500k (no difference from current structure) and a 50% stamp duty exemption for properties priced at RM500k - RM1m for SPA signed between 1 June 2022 – 31 Dec 2023. The campaign should provide savings as a percentage of housing price in the range of 0-0.75% depending on the housing price. We are positive on this development as it will help to lift sentiment on the bruised property market. Maintain NEUTRAL with top picks Sunway and Matrix.

NEWSBREAK

PM Datuk Seri Ismail Sabri Yaakob announced on 15 July that under the Keluarga Malaysia Home Ownership Initiative (i-MILIKI), first time homebuyers will enjoy a 100% stamp duty exemption for property priced at <RM500k (no difference from current structure) and a 50% stamp duty exemption for properties priced at RM500k-RM1m. The exemption will apply for sales and purchase agreements (SPA) that are completed from 1 June 2022 – 31 Dec 2023. (The Star)

HLIB’S VIEW

Stamp duty discount for property priced >RM500k. Referring to Figure #1 below, under a tiered system, the stamp duty percentage for property from RM500k-RM1m will be reduced to 1.5% from 3% under the i-MILIKI campaign. As an illustration (see Figure #2), for a property priced at RM1m, the first RM500k will be exempted from stamp duty, while the following RM500k will be charged a stamp duty of 1.5% amounting RM7.5k (vs. 3% or RM15k under the current structure and RM0 under the HOC). The i-MILIKI campaign provides savings as a percentage of housing price in the range of 0-0.75% depending on the housing price.

Key difference of i-MILIKI to HOC campaign are (i) lower stamp duty exemption incentive (as illustrated above); (ii) only for first homebuyers (vs. no restrictions under HOC); and (iii) no mention on discount for housing price (vs. at least 10% discount on housing price under HOC).

Positive on the news. Under a bruised property market, this development should provide a shot in the arm to help lift the sector sentiment. Having said that, we note tha i-MILIKI is a less attractive campaign compared to HOC due to the key differences as highlighted above. We expect this development to be particularly positive for SPSetia and UEMS, as these two developers’ sales were the most impacted due to the end of HOC as witnessed from their 1Q22 results.

We maintain our NEUTRAL rating on the sector. The current sector dynamics is a tug of-war between the positives and negatives. On the negative end, there is a lack of visibility on when the challenges faced by the developers (elevated building material costs, labour shortage, property market overhang) will start to ease, while demand outlook had also weakened in recent months following the interest rate upcycle and inflationary pressure. On the positive end, the sector recovery is supported by (i) the healthy economic recovery (HLIB 2022 GDP growth estimate: 5.9%); (ii) better job security for buyers (as the risk of a full lockdown had substantially waned) which helps to uplift buying interest; (iii) normalization of construction activities (vs. intermittent halts and restrictions in 2020 and 2021); and (iv) pick-up in property sales activities through resumption of sales gallery. This latest i-MILIKI campaign, while not as attractive as HOC, could nonetheless help to tilt the equation slightly towards the positives. However, due to the general risk-off sentiment in the market and as investors continue to juggle the property market developments, investors are likely to stay on the side lines while awaiting for more clarity and signs of sector improvements. Our top picks for the sector are Sunway and Matrix.

Source: Hong Leong Investment Bank Research - 18 Jul 2022