M’sian property players unaffected by Vietnam ruling

The Vietnam government’s proposal to impose a real estate transfer tax (RETT) of 25% on gains from property transactions, effective Jan 1, 2009 will not have any significant impact on the Vietnam-based projects of Malaysian developers.

Affin Investment Bank Research said Vietnam’s National Assembly passed a law on Nov 20 to impose the RETT, and the proposal had raised concerns the tax would dampen the current bullish sentiments in the Vietnamese property market.

“We do not expect any significant impact to the launches or demand for the Vietnam-based projects of Malaysian developers such as SP Setia (buy, target price RM10.21), WCT Land (buy, TP RM2.59), Gamuda (add, TP RM4.60), Ireka Corporation (buy, TP RM2.23) and Berjaya Land (Not rated),” it said.

In a worst-case scenario, the impact will be minimal for SP Setia and Gamuda, which have more diversified earnings base while WCT Land has not even officially announced its Vietnam projects pending the receipt of investment certificates.

To recap, Affin Research said currently, there was uncertainty whether property transactions fall under the current progressive capital gains tax (CGT) of up to 60%.

As the present tiered structure also complicated the computational and collection system, the research house said it had come to understand that the authorities had simplified and streamlined the CGT for residents to a standard RETT structure.

“While the RETT could curb speculative transactions in the short term, we believe it is unlikely to derail the genuine pent-up demand of new owner-occupiers over the longer term amidst limited residential supply,” it said.

The RETT did not appear to be a reversal of policy by the authorities, which has been encouraging the participation of foreigners in the property market. Media reported that the Hanoi government has allowed the extension of the leases from 50 years to 70 years with further extensions without any payments.

Over the past three years, Vietnam’s GDP growth rates have averaged at an impressive 8.1% annually while investments grew even faster by 18.6% and exports by 25.3%. The country is also rapidly urbanising, especially the industrial areas near Ho Chi Minh, the main retail/commerce/industrial hub and the capital/administrative centre in Hanoi.

Affin Research said new measures were unlikely to derail property demand substantially. Demand for residential units is currently being driven mainly by locals because foreigners are currently allowed to lease but not buy property in Vietnam.

This stems mainly from resident entrepreneurs, business people, government officials and repatriation of money from overseas Vietnamese. While the country’s 2006 per capita gross domestic product (GDP) of US$722 (RM2,440.36) is only 11.8% of Malaysia’s US$6,141, Vietnam’s 2006 growth of 14% outpaces Malaysia’s 5.9%.

It said the proposal had a neutral impact to Malaysian developers. While the new RETT could slow down speculative property transactions, it did not expect it to derail the genuine home-occupier market given the lack of supply.

It said SP Setia’s Vietnam project, a 55:45 JV with Becamex IDC called Eco Lakes @ My Phuoc, had a gross development value (GDV) of RM2 billion (9.5% of the group’s total planned GDV of RM21 billion).

Management expects no changes to the launching of the first phase, carrying a GDV of RM300 million to RM400 million, in 1HFY08 as the investment certificate has been obtained two weeks ago.

The target market was mainly locals who are owner-occupiers in a suburban area which should have minimal speculative appeal.

Affin Research estimated a 6% addition to its FY09 net profit forecast if the first phase can be launched as scheduled.

The research house said WCT Land’s project had not been officially announced yet. The two main Vietnam projects which WCT Land are expected to have a 67% equity stake have not been officially announced yet as investment certificates have not been obtained.

The projects comprised of Gateway Point and Platinum Plaza, of which Gateway Point had a GDV of RM2 billion, located on a 8.4-hectare land near the commercial business centre of Binh Thanh District in Ho Chi Minh City. This project encompassed a five-star hotel, retail shops, office towers and luxury condominiums.

Platinum Plaza, with a GDV of RM1bn, is on a 9ha land in the Binh Chang District in Ho Chi Minh City, about 12km away for the commercial business district.

As for Gamuda, it would proceed with plans on Yenso park development, which has a total GDV of RM8 billion.

Ireka, with its 19.6% stake in Aseana Properties Ltd and its role as the exclusive development manager to Aseana, will soon have a stronger presence in Vietnam. Aseana has been looking at seven property projects in Vietnam with a total GDV of US$1.8 billion.

By The EDGE MALAYSIA