Major boost for high end property
23/03/2007 The Star By KEITH HIEW

PETALING JAYA: Prime Minister Datuk Seri Abdullah Ahmad Badawi, who announced the scrapping of the real property gains tax (RPGT) from April 1, hopes the move would “inject more excitement and dynamism to both the property and financial sectors.”

Speaking at Invest Malaysia 2007 yesterday, Abdullah said the abolishment of RPGT would improve the property sector.

He said it was among the immediate measures intended to further increase and facilitate investments in the country.

Property companies and analysts welcomed the news. They said it would benefit the sector, especially the high-end segment.

OSK Securities analyst Mervin Chow told StarBiz: “We will definitely see an increase in the earnings prospects of property companies, either through an increase in demand or sales values. But it is very hard to quantify the extent at this juncture.

“We will also see increased foreign buying interest in Malaysian properties.”

Chow thinks the chief beneficiary would be higher-end developers with excellent locations. He said RPGT had in the past been one of the prime hurdles for foreign buyers, given the higher holding risk.

“As for the mass residential market (low- to mid-end), the oversupply situation still persists, hence we will not be seeing much improvement there,” he said, noting that the removal of RPGT would encourage a more vibrant secondary market in this segment.

“We will be seeing more interest in property companies with niches in the mid- to high-end market segment in the coming months. Although most of the counters have soared in anticipation of the abolishment, there are still many that are undervalued,” Chow said.

Analysts expect increased foreign buying interests
His top property picks include United Malayan Land Bhd, Plenitude Bhd and YNH Property Bhd.

Mah Sing Group Bhd managing director Datuk Leong Hoy Kum said: “It is heartening that the Government has been so proactive in promoting an investment-friendly regime to enhance local investment, and draw foreign direct investment to Malaysia.”

He said Mah Sing would be a direct beneficiary of the RPGT abolishment, having established a premium branding for its lifestyle products in the Klang Valley and Johor Baru.

“We are in the right segment and locations. The Government's announcement is timely and we anticipate this feel-good factor will be an additional crowd-puller for our preview of Hijauan Residence this weekend.”

Sime Darby Bhd property divisional director Jauhari Hamidi hailed the tax waiver as the “best news” for the property industry, homebuyers and investors, because it “will revive the market which has been soft in recent years.”

“The abolishment will help create more excitement in the property market.

“As for our newly-launched Ara Hill project, the move will encourage earlier upgrades among the growing affluent,” he said.

Scomi Group Bhd chief executive Shah Hakim Zain said the move would further attract foreign investments, while former Road Builder (M) Holdings Bhd executive vice-chairman Tan Sri Chua Hock Chin said it would spark interest in the secondary property market.

Sunway Group founder and chairman Tan Sri Jeffery Cheah said the move would help attract more foreign buyers to the group's properties.

Malaysian Resources Corp Bhd managing director Shahril Ridza Ridzuan told reporters that the scrapping of the property gains tax would encourage more secondary trading and liquidity in the secondary property market.

And IJM Corp chief executive Datuk Krishnan Tan said the lifting of the RPGT would benefit property investors and developers would see improved demand for property.

Tan did not expect an immediate impact on companies' bottom line.

Despite the mostly positive sentiment, some fund managers think the tax waiver could encourage speculation and increase property prices.

They also said the lower income group could be hurt as it would be more difficult for them to own properties.

A fund manager said: “Property prices could surge when speculative activities start. Lower income people could bear the brunt, especially if their salaries do not increase as quickly as property prices.”