Wednesday: 29 August 2007

The Asian property industry, which has been somewhat sheltered from the effects of the US subprime debacle, has great potential to catch up with its global peers. 

Analysts said investments in Asia's property market grew a healthy 40% in the three years up to 2006. 

They said although the performance of the Asia-Pacific listed property developers had been on an uptrend, returns had slowed down recently.  

“The Malaysian property market has been picking up over the past six months, buoyed by several government measures to spur economic growth,” an analyst said. 

Another analyst at a bank-backed brokerage said: “Malaysia has a lot of plus factors as an investment destination. It has one of the best tax incentives in the region.” 

A slew of incentives were introduced last December to boost the property market. 

The Government's move earlier this year to waive real property gains tax (RPGT) and relax foreign ownership restrictions on residential properties priced over RM250,000 have benefited the high-end segment of residential properties, leading to the setting of new benchmark prices.  

Analysts believe the low- to medium-priced property segment might be the next in line to receive a government boost in the form of incentives. They also foresee more tax incentives to revive interest in REITs (real estate investment trusts). 

According to HwangDBS Vickers Research, among the possible incentives are a reduction of stamp duty and the further relaxation of foreign ownership of commercial properties. 

It said property players were also expecting a revamp of the Employees Provident Fund (EPF) depositors' accounts to allow for more withdrawals and a reduction of withholding tax on distributions received from REITs. 

“These incentives could improve the overall sentiment of the property sector,” the research house said in report. 

HwangDBS Vickers Research added that with the relaxation of Foreign Investment Committee (FIC) requirements, removal of the cap on the number of loans foreigners could take up and the exemption from RPGT, Malaysian properties offered an attractive value proposition to investors and homeowners.  

“Nowhere in Asia offers such affordable (properties) at low down-payments (5% compared with as high as 90% in Indonesia) to own properties than in Malaysia. 

“We see the convergence of capital value of Malaysian properties with the regional peers after the liberal moves by the Government,” it said. 

SJ Securities head of research Cheah King Yoong said potential incentives such as the temporary withdrawal of stamp duty and restructuring of EPF depositors' accounts to allow more withdrawals for property purchases could further boost the local property market.  

He anticipates liberalisation to attract foreign participations to the commercial market and more incentives for the Malaysia My Second Home Programme to attract foreign retirees. 

The launch of the Iskandar Development Region (IDR) blueprint in March has undoubtedly stirred up a fair bit of excitement, given the billions of ringgit that would be spent over the next few decades.  

“Further incentives could be given to accelerate the developments in IDR and Northern Corridor Development Region,” Cheah said. 

Hektar Asset Management Sdn Bhd chief financial officer Zalila Mohd Toon said the group believed the Government would continue to give more incentives to the overall property sector. 

“We expect the Government to extend benefits to investors of real estate such as REITs. Enhancements are welcome in the areas of taxation and development capabilities for REITs.”