CIMB ‘overweight’ on property mart



CATALYSTS: Research house sees sales picking up in second half of 2014 amid positive news flow

CIMB Investment Bank remains positive on the property sector and expects property purchases to pick up pace in the second half, ahead of the implementation of the goods and services tax in April next year.

It maintains an “overweight” call on the sector and has chosen Mah Sing as top sector pick.

The research house said in its property market report yesterday that re-rating catalysts for the sector include strong sales by developers in the second half of the year, and positive news flow on infrastructure projects, such as MRT2 and high-speed rail from Kuala Lumpur to Singapore.

“We remain optimistic on the prospects for the residential property sector due to favourable demand and supply dynamics as well as the strong affordability,” it said.

“We do not subscribe to the view that residential property prices will fall as a result of the impact from the numerous measures by the government to curb speculation. This is because residential property prices are largely a function of economic prospects and job opportunities, as well as confidence and sentiment,” it added.

With real gross domestic product growth forecast to accelerate from 4.7 per cent last year to 5.0 per cent this year and the country enjoying what is effectively full employment, combined with a firm stock market, it does not see prices falling at all.

“We believe that house prices will continue to rise 5-10 per cent per annum this year on the back of supply constraints and buyers jumping back in before the implementation of GST in April 2015,” it said.

Transaction volume, however, could shrink by another 10 per cent on the back of the cooling measures.

The supply overhang remains manageable and unsold stock stayed the same at around 66,000 units. Unsold stock declined in the Klang Valley and Penang but rose in Johor.

CIMB IB is most cautious on the Johor market due to the torrent of supply coming from China developers.

However, for developers with townships in Johor that can launch landed properties as well as industrial properties, sales should continue to hold up well.

“While we continue to remain bullish on the prospects of Iskandar Malaysia as a growth corridor, the property play there will likely cool off after last year’s big price spike,” it added.

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