CIMB Research expects the proposal by Bank Negara to modify the mode of calculation for household loans to curb domestic speculation in the local property sector to have only a short-term impact.
“We think that any measures to curb domestic speculation are likely to have only a short-lived impact on physical property sales, as was the case when a flat 5% RPGT (real property gains tax) was levied in October 2009 and an LTV (loan-to-value) ratio of 70% was imposed on the third-property purchase in November 2010.
“In both cases, the impact on the real property market was a wait-and-see attitude by buyers for two to three months before they rushed back into the market when they realised that house prices were firm and still rising,” it said yesterday.
The research report was in reference to a recent local news story which reported that the central bank had issued a white paper to obtain feedback on the possibility of basing the calculation of household loans (mortgage and hire purchase) on net pay instead of gross pay.
“The report is yet to be confirmed and even if the measure is implemented, we believe it could be mild as the intention is to curb speculation, not hammer overall sentiment.
“Even if we assume the worst-case scenario where a change in the calculation results in a 26% fall in affordability, in line with the maximum personal tax rate, the affordability ratio is still very healthy,” said CIMB.
CIMB noted that a share prices of property stocks had been on a downtrend since the news report, which also spilled over to construction companies with significant property exposure.
The research house believes that the Government would be careful not to implement measures that would have too negative an impact on the property sector as it would still want to encourage home ownership, and restrictions would have the opposite effect.
“The Government hopes to unlock the value of its idle land in the Klang Valley and measures that would hurt the sector could result in lower bids for the land, and the performance of the property sector affects other key sectors of the economy and property restrictions in the run-up to general elections may not be popular,” it said.