According to data released by Bank Negara Malaysia, loan applications for the purchase of property declined for the third consecutive month. Total loan applications fell by -2.9%mom in November 2022 which follows the declines of -11.1% and -7.3% in September and October 2022. MIDF in its report noted the weak loan application was due to hikes in OPR by BNM in September and November.
The weaker demand could also be attributed to the wait-and-see approach of buyers due to GE15 of Malaysia in November. On yearly basis, loan applications fell by -21.3% after falling by -10%yoy in October, as demand for property is
normalising from strong demand last year as a result of the economy reopening.
Total loans approved for the purchase of property declined by -12.6%mom in November after a marginal drop of 0.4% in October. The decline in approved loans was mainly due to lower loan applications and a lower percentage of total approved loans over total applied loans of 42.3%. On yearly basis, the loan approved recorded a decline of -15.2%yoy in November 2022 after recording positive growth in the past few months. MIDF sees that a further decline in approved loan going forward may signal a challenging new sales outlook for property developers.
MIDF also notes the performance of the KL Property Index was lackluster in 2022 by registering a decline of -8.9%, in tandem with a broader weaker market whereby KLCI fell by -4.6% in 2022. KL Property Index underperformed KLCI due to the high beta nature of property stocks amid the rising risk of inflation and economic uncertainties. Performance of the KL Property Index was better in 1HCY22 due to the reopening of Malaysia’s economy. Subsequently, property counters succumbed to sell-off in 2HCY22 due to rising interest rates by Bank Negara Malaysia and Federal Reserve. The top
three worst-performing property companies in 2022 were Country Heights Holdings Berhad (-78.3%), Yong Tai Berhad (-
66.7%) and S P Setia Berhad (-52.9%).
Despite the weakness in the share price of property companies in CY22, MIDF thinks that there are limited catalysts to spur the sector in the near term. Property sales outlook is expected to be subdued judging from the weaker loan application while demand for the property could further drag by a potential OPR hike in 2023. The research house is maintaining a Neutral stance on the property sector. Top picks for the sector, Mah Sing Group (BUY, TP: RM0.74) and Glomac Berhad (BUY, TP: RM0.48) as they have high exposure to mid-market and affordable homes segments which underpin new sales outlook.
