[Property] 3 Critical Factors to Watch Out by Year End (July 2013)

Ever since the property boom started in 2009, right after the global financial crisis, investors were laughing to the bank. But, can these sustain until next year? Many analysts doubt so. Why?

The most crucial determining factors might uncover itself in the next few months, approaching year end. In short, we have summed out to the below 3 critical factors:

1. Banning of DIBS
   This is not a secret anymore. Speculation rife up recently, saying that BNM may ban the Developer Interest Bearing Scheme (DIBS) by year end. BNM is studying the implications of DIBS which benefiting speculators more than serious buyers. Note: Singapore already banned such scheme few years back.
   
   
2. Interest Rate hike
   BNM also may revised the Overnight Policy Rate (OPR), which determine the cost of financing in the country including Base Lending Rate (BLR) for mortgage loan. A 25 basis points hike was expected. This will affect all type of loans, except fixed interest loans. Let's get prepare for higher monthly loan installment amount.
   
   
3. Higher RPGT
   Coming this 2014 budget to be tabled on 25th Oct, watch out for higher Real Property Gain Tax (RPGT). Currently, it was 15% for first two years and 10% for disposal from 3rd year to 5th year. Note: RPGT was much higher before 2008.

In our view, once DIBS was banned, developer no need to bear the interest, financier no need to bear the risk, new launching properties should be selling at lower price. Then, this is bad news for existing property, especially bought under DIBS before?

Example, phase one selling at RM500k under DIBS, phase two selling at RM500k without DIBS. No effect?

Think again... More supply now releasing for secondary market, assuming phase two also selling at same price, which is very good already. Right?