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Thursday, March 12, 2009

SP Setia, Mah Sing schemes more effective than tax relief

KUALA LUMPUR: Kenanga Investment Bank Research prefers innovative township developers like SP Setia and Mah Sing Group whose attractive packaging is more effective than the tax relief announced under the RM60 billion stimulus package.

It said on March 12 the 5/95 deferred payment scheme, offered by SP Setia and Mah Sing Group, was more of a shot in the arm for the sector as it addressed affordability issues.

“Developers bearing interest cost over the construction period saves relatively more than the tax relief. Consequently, SP Setia chalked up RM300 million sales in less than two months under the 5/95 programme,” it said.

Kenanga Research has a buy call on SP Setia with a target price of RM4.25 and a buy call on Mah Sing at a target price of RM1.96.

The tax relief announced on March 10 is only applicable to new home buyers. The tax relief would only be applicable for new sales and purchase agreements (SPA) signed on March 10 this year to end-2010.

The incentive is only applicable to owner-occupied residential properties; hence, those buying investment or yield accretive properties will not be entitled to the tax relief

Kenanga Research said the tax relief incentive was unlikely to boost property transactions amidst economic uncertainties, particularly when the incentive is only valid for new transactions for less than two years.

“As it is, potential home buyers are adopting the ‘wait and see’ strategy (for example those facing retrenchment or job uncertainties),” it said.

It cited the Australian first home ownership grant scheme, where the

Queensland and New South Wales governments give A$16,000 grant for first time home purchasers in their respective states; equivalent to 5.5% of an average house price of A$290,000.

The research house said would be more effective to boost property transactions. If the grant substantially subsidises the initial down payment (ranging 5% to 20% of selling price), it will spur more property transactions; especially properties become more affordable.

By The EDGE Malaysia

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