Maintain overweight with buy calls on Mah Sing Group Bhd, Malaysian Resources Corp Bhd, Eastern & Oriental Bhd and Titijaya Land Bhd: The Edge weekly reported that the federal government is considering a proposal by the Real Estate and Housing Developers’ Association Malaysia (Rehda) to relax lending guidelines to boost first-home ownership.
This follows Rehda’s proposal to the government to reintroduce the Developer Interest-Bearing Scheme (DIBS) for first-time house buyers.
The DIBS is a scheme whereby a developer helps the buyer of its property absorb the mortgage interest during its construction. According to The Edge weekly, the selling prices of properties sold that come with a DIBS package may fetch a premium of between 5% and 15%. Recall that the DIBS scheme was removed last year.
The other measures include: a 70% loan-to-value ratio ruling for third residential mortgage loans and above; the introduction of responsible lending guidelines; calculation of mortgage loans based on the net selling price of the property; and a minimum threshold of RM1 million for foreign property investors. Plus, the overall property sentiment has not been aided by a weakening ringgit and the imposition of the goods and services tax (GST) in April.
The push to reintroduce the DIBS policy follows a “wish list” that Rehda had submitted to the federal government ahead of Budget 2016. Among the key suggestions reportedly mooted were: introduction of a homebuyer-friendly scheme by banks, particularly for first-time homeowners of houses priced up to RM500,000; a revision of the bumiputera quota policy; GST relief for affordable housing and controlled properties; reduction in the cost of doing business; and higher supply of affordable housing.
While most of these requests were not directly addressed or mentioned in Budget 2016, the government’s subsequent willingness to reconsider the DIBS could be a boost in our view.
If pushed through, we envisage the reintroduction of the DIBS — along with inventory liquidation initiatives by developers — to eventually kick-start a recovery in transaction volumes.
Such a move should help nurture a narrowing in discounts to net asset values among property stocks.