Property Sector: New Budget Measures May Boost Recovery

The 2020 Budget includes a few measures to boost the property sector, such as:

• Lowering of the threshold of high-rise property prices in urban areas from RM1 million to RM600,000 for foreign buyers
• Shifting the real property gain tax base year from 2000 to 2013
• A new Rent-to-own scheme for first-time homebuyers
• Extension of BSN's Youth Housing Scheme

Hopefully these measures will put a floor on the property prices and even boost activity in that sector, which has good multiplier effect for the rest of the economy.

Looking at the chart below, we can see that Property Index (at 770) is fast approaching the support at the horizontal line at 750. After a drop of nearly 50% from the peak at 1500, property stocks are fairly attractive.


Chart: Property Index as at Oct 11, 2019

The Starbiz has an article on the depth of the slump in share price for property counters. It is entitled Beaten-down property stocks at bargain levels. The hard copy of the article has the table and the chart below.


Table: Property developers' financials


Chart 2: Property developers' price-to-book ratios vs. their gearing ratios

The stocks that are close to the bottom left-hand corner of the above chart are relatively attractive than those that are close to top right-hand corner.

I like the following Kenanga's picks for property sector- ECOWLD, IOIPG, MAHSING, SIMEPROP, SPSETIA and UOADEV.