According to data released by Bank Negara Malaysia, the total loan applied for the purchase of the property was flattish in March 2022 at RM44.9b (+0.1%yoy) after growing by 9.2%yoy in February 2022. That brought the cumulative total loan applied for the purchase of property to RM108.1b (+4.06%yoy) in 1Q2022. MIDF feels the higher application for property loans was driven by higher demand for property following the reopening of the economy. On a sequential basis, property loan applications jumped to RM44.9b (+56.8%mom) due to a low base in February as February is a short month.
Accordingly, MIDF says, the total loan approved for the purchase of property climbed to RM16.4b (+17.8%yoy) in March 2022 after growing by 9%yoy in February. Cumulatively, the total loan approved for the purchase of property increased to RM42.4b (+19.4%yoy) in 1Q2022. The higher approved loan was mainly driven by higher loan applications and higher percentage of total approved loans over a total applied loan of 39% in 1Q2022 against 34% in 1Q2021. In a nutshell, MIDF sees higher approved loans should translate into a better new property sales outlook for property developers in 2022.
Rising building material costs. The increase in prices of petroleum products has led to increased costs of building
materials namely cement and steel. The higher raw materials cost is expected to lead to higher costs for property developers. MIDF reckons that property developers may partially pass on the higher building materials cost to property buyers by raising property selling prices marginally, the research house thinks that property developers are likely to face slight margin compression in the near term as they may not be able to fully pass on the cost increase to property buyers considering the present subdued property market.
Maintain NEUTRAL on the property sector. The higher loan application and approved data in March 2022
suggested recovery of property demand remains intact which is in line with our expectation of a marginal better new property sales outlook. MIDF maintains its view that the new property sales outlook is expected to be slightly better in 2022 due to the reopening of the economy. Nevertheless, property developers may face cost pressure in 2022 due to rising raw material costs. Hence, it maintains Neutral call on the property sector.
BUY calls for the sector are Mah Sing (BUY, TP: RM0.80) and IOI Properties Group (BUY, TP: RM1.29). MIDF remains positive on Mah Sing as we see a better earnings outlook in 2022 due to higher progress billing and contribution from the gloves manufacturing segment. Besides, new property sales are expected to be better in 2022 due to its strategy of building affordable range properties. A positive view is also seen for IOI Properties Group due to its undemanding valuation of trading at a steep discount of 72% to the latest NTA of RM3.60 per share. It also expects earnings recovery for its investment properties division and hospitality & leisure division in 2022 due to the resumption of economic activities and reopening of the national borders of Malaysia
