PETALING JAYA: MIDF Research is maintaining a “neutral” outlook but with a “positive bias” on the property industry, after Bank Negara revealed that loan applications for property purchases had rebounded by 26.6% month-on-month (m-o-m) in February.
The second month of the year incidentally also saw loan applications at the highest level in six months, which the research outfit believes could be due to recovery in buying interest following a pause in the central bank’s overnight policy rate (OPR) hike in January, as loan applications soared 40% year-on-year (y-o-y) with buying interest recovering from the subdued demand in the past few months.
Total approved loans also grew by 26.6% m-o-m, inline with the rate of increase in the number of applications, reversing the declining trend of the five previous months.
However, MIDF Research said the encouraging growth was partially negated by a lower percentage of total approved loans over total applied loans of 37.5% in February, compared to January’s 42%.
Having said that, the securities firm noted: “On a yearly basis, approved loans surged by 31.8% y-o-y after three consecutive monthly declines in November 2022 to January 2023.
“We think that the higher approved loans may signal that the negative impact of the OPR hikes in 2022 is over and the sales outlook for developers should improve going forward.”
MIDF Research reported that the KL Property Index (KLPR) recorded a positive return of 7.3% in the first quarter of 2023 (1Q23), outperforming the FBM KLCI which incurred losses of 4.9%.
The research house also attributed the pause in OPR hikes in 2023 to providing short-term relief to the sector, as an unchanged OPR would bode well for home loan applications.
“The gains in the KLPR were mainly led by small to mid-cap property developers.
“The top five performers of KLPR in 1Q23 were Ewein Bhd, Iskandar Waterfront City Bhd, MCT Bhd, Sapura Resources Bhd and Tanco Holdings Bhd,” it added.
Meanwhile, according to data released by the National Property Information Centre, MIDF Research revealed that transaction volume of properties rose by 29.5% y-o-y to 389,107 transactions in 2022, adding that the spike in transaction volume was mainly supported by pent-up demand following the reopening of Malaysia’s borders last year.
“We note that transaction volumes were subdued in 2020 and 2021 due to the lockdowns which restricted transaction of properties by foreign buyers. Residential transactions are the biggest contributor to transaction volume at 62.5%, followed by agriculture transactions at 21.1% and commercial transactions at 8.4%,” it said.
The research outfit is optimistic on developers that target properties in the mid-market and affordable segments, as buying interest is strong amid a normalising interest rate environment.
Its top picks for the sector are Mah Sing Group Bhd and Glomac Bhd for exactly this reason, namely their high exposure to mid-market and the affordable housing segments.
It has a target price of 75 sen for Mah Sing, underpinned by better earnings outlook in 2023 on the back of higher progress billing of its ongoing projects.
The research house also commended Glomac on its township projects which offer affordable price range properties that are well received by home buyers.
