According to data released by Bank Negara Malaysia, loan applications for the purchase of property fell by 7.3% month on month to RM43.95b in October 2022. This is following a decline of 11% in September 2022. MIDF reckons the two consecutive declines in loan applications could be due to the OPR hike BNM in September which negatively impacted buying interest and affordability of buyers.
On yearly basis, loan applications eased by 10%yoy in October 2022 after the positive growth in the past three months, signaling demand for property is taking a breather. Looking ahead, the house sees that loan application to remain subdued as BNM hiked OPR by 25bps in November and may hike OPR further in 2023.
Based on data released by the National Property Information Centre (NAPIC), residential overhang units eased significantly from 34,092 units in 2Q2022 to 29,534 units in 3Q2022. The sharp drop in overhang units was led by Selangor (-14.9%qoq), Johor (-11%qoq), and Penang (-5%qoq). Note that Johor has the highest residential overhang of 5,348 units, followed by Penang (5,222 units) and Selangor (4,386 units). The decline in overhang units could be attributed to the reopening of the economy. Besides, foreign buyers such as from Singapore returned to our local property market following the reopening of the international border in April 2022. In a nutshell, MIDF sees the lower property overhang units to
be slightly positive to the property sector as overhang units fell below 30,000 units which is the lowest level since 2Q2021.
In view of this data, MIDF maintains a Neutral on the property sector and sees a tepid outlook for loan application going forward as demand for property could partially drag by rising OPR. Nevertheless, the easing of property overhang is slightly positive for the sector as a further decline in property overhang going forward may ease the concern of oversupply in the residential market.
As for top picks for the sector, MIDF favours companies with high exposure to affordable price range properties as projects in the mid-market and affordable segments continue to see resilient demand from home buyers. In this context, MIDF likes Mah Sing Group (BUY, TP: RM0.74) and Glomac Berhad (BUY, TP: RM0.48) due to their strategy of selling properties in the affordable price range.
