Property Development Housing

Property Development Housing 

 

- Property stimulus measures approved as expected 

At the cabinet meeting yesterday, the property stimulus measures were approved, comprising lowering housing transfer tax and mortgage tax (new and second-hand homes) to 0.01% for six months, effective immediately until April 30, 2016. The Government Housing Bank (GHB) issued B10bn housing loans from October 19, 2015 to December 31, 2016. In addition, buyers of home worth up to B3m are allowed to deduct 20% of home value from income tax for five years, starting from the day of purchase and transfer until December 31, 2016. 

- Benefiting both customers and developers 

The aforementioned measures aim to help low-income home buyers access source of fund and benefit property developers, focusing on homes worth up to B3m. They also reduce home-buying cost. Initially, both customers and developers bear housing transfer tax at 1% of appraised price. Thanks to these measures, housing transfer tax decrease by 0.6%, and customers' mortgage tax burdens would decrease by nearly 1% of home price, or B0.01m of every B1m of home price. In addition, buyers of home worth up to B3m are allowed to deduct B0.6m from income tax for five years, or B0.12m each year. Fifteen companies under our coverage with total backlog of B240bn would be more able to generate income, their profit margin before tax would rise by 0.6%, and they would be more able to sell off their ready-for-sales inventories within the measures period (B40bn at end-2Q15), thus boosting their home transfers and cash flows in 4Q15-1Q16.  

- PS to benefit most, peak in 4Q15 

We recommend NEUTRAL for the property sector. Developers with ready-for-sales properties that can be transferred in 45-60 days, high backlog that will generate income in 4Q15, and ready-for-living properties that can be immediately transferred within the measures period are projected to benefit most from the property stimulus plans: PS([email protected]), LPN([email protected]), and SPALI([email protected]). Top pick is PS for its best fundamental factors.