PETALING JAYA: The rebound in loan applications and approved loan data in May 2023 is a “slight positive” for the property sector.

MIDF Research said the improvement signalled that the demand for property remains supported, while the outlook of new property sales is expected to be better.

“In a nutshell, we maintain a ‘neutral’ call with a positive bias on the property sector. Our top picks for the sector are Mah Sing Group Bhd and Glomac Bhd,” it said in a note.

In May, loan applications for the purchase of property rebounded by 23% month-on-month (m-o-m), following a decline of 23% m-o-m in April 2023.

According to MIDF Research, the jump in May could be due to higher loan applications following the break for the festive season in April 2023.

It also said that the higher total loan applications in the first five months of 2023 indicated better demand for property.

“Nevertheless, buying interest on property could be dampened slightly as Bank Negara increased the overnight policy rate (OPR) by 25 basis points to 3% in May 2023,” stated the research house.

Meanwhile, total loans approved for the purchase of property jumped by 18% m-o-m in May 2023, reversing the decline of 17% m-o-m in April 2023.

“On a yearly basis, approved loans rebounded by 18% year-on-year (y-o-y) in May 2023 after a decline of 11% y-o-y in April 2023.

“Cumulatively, total loans approved stood at RM106.5bil in the first five months of 2023, increasing by 10% y-o-y which bodes well for new property sales outlook for developers,” MIDF Research said.

Looking ahead, MIDF Research believes that the move to retain the OPR at 3% in July provided a short-term relief to the sector.

“The unchanged OPR is positive to the property sector as buying sentiment is expected to remain healthy without a hike in the OPR.

“Note that a higher OPR would raise the financing cost of housing loans and hence dampen buying interest in property.

“Besides, the unchanged OPR is expected to benefit property developers in terms of financing cost.

“Financing cost for property developers is expected to remain stable in the near-term as some of the developers have considerable high exposure to floating rate debt,” it said.

MIDF Research noted that the Bursa Malaysia Property Index outperformed the FBM KLCI in the first half of 2023.

The Property Index recorded a gain of 7.6% against the FBM KLCI’s losses of 7.9%.

“Property counters saw stronger trading interest following the pause in the OPR hike by Bank Negara in January 2023 and March 2023, as the pause in the OPR is expected to support buying interest on properties.

“Besides, we think that the declining residential overhang in the first quarter of 2023 following the reopening of the country’s borders helped support sentiment in property stocks,” MIDF Research said.