AmWatch - Property Sector : Reinstatement of DIBS for first time home owners? OVERWEIGHT

SECTOR FOCUS OF THE DAY

Property Sector : Reinstatement of DIBS for first time home owners?     OVERWEIGHT

The Edge Malaysia reported that the Federal government is considering a proposal by the REHDA to relax lending guidelines to boost first home ownership. This follows REHDA’s proposal to the government to reintroduce the Developers Interest Bearing Scheme (DIBS) for first time house buyers. DIBS is a scheme where a developer helps the buyer of its property to absorb the mortgage interest during its construction. According to The Edge Malaysia, 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:- (i) 70% loan-to-value ratio ruling for third residential mortgage loans and above; (ii) introduction of Responsible Lending Guidelines; (iii) calculation of mortgage loans based on the net selling price of the property; and (iv) minimum threshold of RM1mil for foreign property investors. Plus, overall property sentiment has not been aided by a weakening Ringgit and the imposition of the GST in April. The push to reintroduce the DIBS policy followed a ‘wish list’ that REHDA had submitted to the Federal government ahead of Budget 2016. Among the key suggestions that was reportedly mooted are: (i) introduction of a homebuyer friendly scheme by banks, particularly for first time homeowners of houses priced up to RM500k; (ii) revision of the Bumiputera quota policy; (iii) GST relief for affordable housing and controlled properties; (iv) reduction in the cost of doing business; and (v) higher supply of affordable housing. 

While most of these requests were not directly addressed or mentioned during Budget 2016, the government’s subsequent willingness to reconsider DIBS could be a boost, in our view. If pushed through, we envisage the removal of the DIBS – along with inventory liquidation initiatives by developers – to eventually kickstart a recovery in transaction volumes. Such a move should help nurture a narrowing in discount to NAVs among property stocks. With the sector, we remain BUYERs of Mah Sing Group, MRCB, E&O and Titijaya Land

Others :

Banking Sector : Fifth consecutive month of higher impaired loans (loans)            NEUTRAL

Banking Sector : Foreign shareholdings in MGS retraced further in September (MGS) NEUTRAL

               

QUICK TAKES

CIMB Group : CIMB Niaga’s asset quality remains subdued in 3Q               HOLD

Malayan Banking : Rebound in net earnings for BII in 3QFY15       HOLD

Plantation Sector : Newsflow for week 26 to 30 October                OVERWEIGHT

Banking Sector : UOB’s 3Q briefing highlights prevailing cautious outlook                (UOB)                  NEUTRAL

NEWS HIGHLIGHTS

Automotive Sector : Perodua expands into pre-owned vehicle retail segment

Airlines Sector : Airbus to spend RM25mil on new centre in Malaysia

Consumer Sector : Nestle ramps up instant noodles output as M’sians eat 3.6m packets a day