Putrajaya is unlikely to impose stringent property curbs in Budget 2019, but its plans to implement new real estate taxes could negatively affect market sentiment, which is already reeling from affordability issues and tough lending rules, reported The Edge.

"We do not expect any harsh cooling measures to be announced in the upcoming budget, as earlier measures have started to soften growth in the nation's property prices," said TA Securities analyst Thiam Chiann Wenin an industry note published on Monday (15 Oct).

"However, any introduction of new taxes such as inheritance tax, capital gain tax, etc, whilst (there is) no direct implication to the local property market, could weigh on house buyers' and investors' sentiment. This does not bode well for the property market, as the sector has already been impacted by affordability issue and strict lending."

While the budget for next year could include provisions that will help Malaysians buy homes and secure housing loans, the federal government is not expected to ease its real estate curbs over the short-term.

This is because a relaxation of property cooling measures could be viewed negatively by the rakyat as it may lead to the return of home flippers and speculators to the detriment of people who actually need housing.

Although Budget 2019 will likely include a number of new taxes, there is greater chance that Putrajaya will increase the buyer's stamp duty for overseas nationals purchasing properties in Malaysia rather than impose new taxes that will directly impact the already sluggish property market.

After the Finance Ministry warned about a "difficult budget", TA Securities has reduced its target stock prices for property companies that it monitors. For instance, it is advising investors to sell shares of Hua Yang, Ibraco and Glomac, instead of holding them as previously advised.

"While lowering target prices for all the counters under our coverage, we maintain our 'Neutral' stance on the sector, as we believe the potential downside risks have already been reflected in the recent fall in share prices," noted Thiam.

On the other hand, that for IOI Properties Group and SP Setia have been upgraded to "Buy" from "Hold" previously.

Overall, the Kuala Lumpur Property Index has fallen by 10% in September compared a lower 4.0% drop in the benchmark KLCI index.