KEY HIGHLIGHTS

• Focus is on First Home Buyers
• Increase in stamp duty on real estate above RM1.0m
• No increase in EPF Account 2 allocation for home financing
• Real Property Gain Tax (RPGT) rate is unchanged while DIBS ban stays
• Recent data shows that the dynamics of the sector are still weak
• Maintain NEUTRAL on the sector; UOADEV downgraded to NEUTRAL

Focus is on First Home Buyers. In the Budget 2017 announced last Friday, the government has announced a new special “step-up” end-financing scheme for the PR1MA program. Through this scheme, financing will be easier and more accessible to the buyers with total loan up to 90% to 100% with loan rejection rate to be reduced drastically. Stamp duty exemption is also increased to 100% (from 50%) for house purchase and loan (only for house with value up to RM300,000 for first home buyers). We believe that these measures should relief the burden of first home buyers slightly. However, the public listed developers will not benefit significantly as almost all of their products are in different price categories. For details on the measures, refer to Page 2.

Increase in stamp duty on real estate above RM1.0m. The rate of stamp duty on instruments of transfer of real estate worth more than RM1.0m will be increased from 3% to 4% effective 1-Jan-2018. This measure is expected to affect sales for high end house from 2018 onwards. However, we reckon there will be a slight short term increase in demand to buy ahead in 2017 before the new measure takes effect.

No increase in EPF Account 2 allocation for home financing. Before Budget 2017, media has reported on the possibility of increasing the fund from Employees Provident Fund (EPF) Account 2 to 40% (from the current 30%). This is aimed to assist first home buyers in their home financing. However, this is not mentioned in the Budget 2017 speech and hence the current 30% allocation to Account 2 in the EPF account stays. We are neutral on this as the status quo allocation remains.

Real Property Gain Tax (RPGT) rate is unchanged while DIBS ban stays. There is no change to the Real Property Gain Tax (RPGT) rate. As for Developer Interest-Bearing Scheme (DIBS), it is still disallowed. We are Neutral on the unchanged RPGT rate as this means that the Government may view that the current policy is working and hence there is no further cooling measures needed. Having said that, the DIBS ban stays and this means little cheer for property developers as well.

Recent data shows that the dynamics of the sector are still weak; maintain NEUTRAL on the sector. The latest Bank Negara statistics show that “Approved Loan for Purchase of Property” in Aug-2016 decreased 5%yoy to RM11.28b. The decline in approved loan was mainly due to lower approval rate by the banks. However, an 8% improvement was seen on a monthly basis. On a cumulative basis, total approved loan for 8M2016 was at RM78.73b (-20%yoy). We maintain our NEUTRAL view on the sector due to lack of catalysts seen from Budget 2017 as well as weak performance seen from recent data.

Source: MIDF Research - 24 Oct 2016