Interest rate hike may be as early as tomorrow

July 9, 2014 MYT 9:08:58 AM

PETALING JAYA: The anticipated interest rate hike, which many believed will happen by as early as tomorrow, is unlikely to cool demand in the property market.
In fact, RHB Research Institute said it expected sales to improve in the third quarter, as the recovery in the second quarter gained new traction.
The firm is keeping its “overweight” stance on the property sector with its top picks being Sunway Bhd, Tambun Indah Bhd and Matrix Concepts Holdinsg Bhd.
“We believe the impact has already been priced in,” the firm said. “A 25 basis points hike either in July or September should be manageable for the property market, as this may raise monthly the mortgage instalment by only about 3%,” analysts Loong Kok Wen and Alia Arwina wrote in their client report yesterday.
The research house’s economics team expects a 25bps increase in overnight policy rate (OPR) in the second half of the year, either in July or September.
Should the rate hike happen, RHB expects the mortgage rate to likely continue hovering at 4.1 to 4.3%.
Giving an example, RHB noted that a housing loan instalment would increase by an average of RM263.52 per month for a borrowed sum of RM2mil.
It expected property sales to pick up gradually from the second quarter of the year, partly due to the a slowdown in property price growth.
“Numbers should be stronger in the third quarter. A few developers under our coverage are already seeing better sales, including Tambun Indah Land Bhd and Matrix Concepts. We have started seeing an uptick in property loan approvals since late first quarter, pointing to a gradual recovery in property sales in the second quarter,” RHB said.
It said since its sector upgrade in end-March, the Kuala Lumpur Property index had appreciated by 7.4%. “The rally was stronger in April, but it fizzled out when worries over an interest rate hike emerged in May,” it added.
Moving forward, Loong and Alia noted that marginal property buyers and investors were likely to buy properties towards late 2014 to avoid paying the goods and services tax which would kick in from April 2015.
Elsewhere, it expected corporate deals to continue to spice up the property sector, on back of the recent privatisation of IJM Land Bhd by its parent company IJM Corp Bhd.
“SP Setia Bhd is a likely candidate,” RHB said.