HwangDBS stays positive on Malaysia property sector

The research house's top picks include SP Setia, Eastern & Oriental, DNP Holdings and Sunrise.

HwangDBS Vickers Research Sdn Bhd remains positive on the local property sector with top stock picks including SP Setia Bhd, Eastern & Oriental Bhd, DNP Holdings Bhd and Sunrise Bhd.

The research house said there were several myths surrounding the property market, such as a rise in interest rate is a negative sign and that property sales strongly correlate to interest rates.

"The overnight policy rate rises would likely be gradual (2010 forecast: 75 basis points) and unlikely to recoup the cumulative 150 bps cut from November 2008," it said in a report yesterday.

Mortgage rates may not rise in tandem given the intense competition among banks and every 25bps rise would increase monthly instalment by 3 per cent.
Secondly, property sales are driven more by economic outlook, income growth, windfall gains from share market or commodities and policy changes.

Therefore, sales should be robust as long as banks are willing to lend. Developers could also offer more attractive products or incentives to stimulate demand.

Finally, the myth that there is a property bubble in Malaysia is inaccurate as property prices here have been appreciating at a much slower rate compared to income growth.

"There is limited hot money as locals make up more than 90 per cent of total sales. High-end property prices in KLCC and Mont' Kiara are still 20-30 per cent below peak, unlike Singapore and Hong Kong which have set new benchmarks," the report said.

It also said that household gearing levels remain at a comfortable 42 per cent while mortgage non-performing loans have inched lower to 4.2 per cent compared to 5.6 per cent in 2008.

By Business Times