Sector News Flash:
Property (Overweight),
‘Tis The Season To Be Jolly About Mortgages
Property (Overweight),
‘Tis The Season To Be Jolly About Mortgages
Our
ground checks reveal that commercial banks are stopping their promotional
mortgage rates. However, as they are aiming for double-digit mortgage growth
rates next year, we expect them to re-introduce packages at lower rates as well
– since the rates do not yet reflect the latest cut made by BI in Oct. Note
that the combination of the relaxation of LTV thresholds and lower mortgage
rates following the BI rate cut during 3Q16 resulted in a shifting of consumer
preferences back to obtaining financing for properties via a mortgage.
¨ Promo on hold, but...
we
learnt that some banks are stopping their promotional mortgage packages this
month. The current normal mortgage rate has a fixed interest rate of 9.5-10.25%
for one year. Bank Central Asia (BCA) (BBCA IJ, NEUTRAL, TP: IDR17,200) is
still offering the lowest mortgage rate with its latest Fix & Cap promotion,
ie 7.99% pa fixed interest for the first three years and capped for a further
three years at 8.99% pa. This is almost 50bps lower thanwhat was offered in its
previous Fix & Cap promotion. However, we believe IND Banks would
continue to introduce lower mortgage rates in the future as:
i. Banks are aiming for double-digit growth in
their mortgage segments in 2017. BCA and Bank CIMB Niaga (CIMB) are aiming for
12% and 9-10% mortgage loan growth respectively;
ii. Based on research by rumah123.com, the most important
factor in buying properties is the Bank Indonesia (BI) rate. Most buyers still
utilise mortgage facilities to purchase properties. This is also reflected in
the trend shifting back towards taking a mortgage as a payment method during
3Q16. This is due to a combination of the relaxation of the loan-to-value (LTV)
thresholds and lower mortgage rates following BI’s rate cut.
As such, we expect banks to start
re-introducing their respective mortgages at lower rates earliest by Jan 2017.
Their current mortgage rates do not yet reflect the latest BI rate cut, which
was made in October. Note, also, that presales activities in December are more
moderate.
¨ Maintain OVERWEIGHT. We keep our
OVERWEIGHT rating on the sector, as we expect a better outlook in 2017 as the
following factors have already been priced in:
i. All the catalysts that include the tax
amnesty;
ii. A potentially lower benchmark interest rate;
iii. The relaxation of the LTV threshold;
iv. The allowance for properties under
construction to come under a second mortgage.
The
share prices of property counters under our coverage have softened following
public protests on 4 Nov that demanded incumbent Jakarta governor Basuki
Tjahaja Purnama, commonly known as Ahok, be arrested for blasphemy. Share
prices dropped further after the US election was concluded on 9 Nov. On
average, share prices have plunged 9% YTD since 4 Nov. These numbers have
recovered by 5% on average from their lowest level during the same period.
Nonetheless, the sector is currently valued at a 65% discount to RNAV, or
around -1.5SD from its 3-year mean of 56%, which looks compelling.
Kindly click the following link for the full report: Real Estate: ‘Tis The Season To Be Jolly About Mortgages
Lydia Suwandi
Vice President
Research Analyst - Property
PT. RHB Securities
Indonesia
