Monday, November 21, 2011

RHB Research underweight on property sector

KUALA LUMPUR (Nov 21): RHB Research Institute said the property sector's fundamentals remain weak.

It said on Monday, the prolonged sovereign debt crisis in the EU countries has overshadowed the global economic outlook next year.

'Therefore, property sales are likely to taper off (after a 21% growth in 2010) with a growth of 0%-5% in 2012, given that it is highly driven by GDP growth,' it said.

RHB Research said from its recent conversation with developers, potential buyers are indeed taking longer time in their property buying decisions than previously, especially on premium PROPERTIES []. Mass housing will continue to fare better due to pent-up demand.

'Although we have recently upgraded UEM Land to Trading Buy and Mah Sing to Market Perform, we maintain our Underweight stance on the sector. Our stock pick is selective.

'Over the short-term, we foresee UEM Land to benefit from more O&G-related news flow in Iskandar, while IJM Land's share price could be supported by potential M&A angle following the recent offer made by PNB to SP Setia,' it said.

RHB Research said as expected, further regulations were imposed on household financing that will have an impact on the property sector.

'In our view, the guidelines issued by BNM do not come with reinforcement. This means the banks will still have flexible options in their credibility assessment,' it said.

The research house said that based on its checks, some banks are already assessing potential borrower's net salary in their evaluation process.

RHB Research said having said, the banks are likely to tighten their lending on home mortgages gradually going forward, as signaled by BNM.

'While the immediate impact will not be seen until 1H2012, we believe the high-end segment will be more sensitive to regulatory tightening as financing availability gets narrower. Based on our sector report dated Sept 5, 2011, the stricter lending rules are likely to result in 11%-37% decrease in affordability,' it said.


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