According to data released by Bank Negara Malaysia (BNM), loan applications for the purchase of property rebounded by +26.6%mom in February 2023 after five consecutive declines in the previous months. Loan application reversed the downtrend in February 2023 and jumped to the highest level in six months which we think could be due to recovery in buying interest following the pause in the OPR hike in January. On yearly basis, loan applications jumped by +40%yoy as buying interest recovered from the subdued demand in the past few months.
Total loans approved for the purchase of property increased by +26.6%mom in February 2023 to the highest level n four months. Total loan approved recovered from five consecutive declines in the previous months, supported mainly by higher loan applications. However, the increase was partly negated by a lower percentage of total approved loans over a total applied loan of 37.5% in February 2023 (January 2023: 42%). On yearly basis, approved loans surged by +31.8%yoy after three consecutive declines from November 2022 to January 2023. We think that the higher approved loan may signal that
the negative impact of OPR hikes in 2022 is over and the sales outlook for developers should improve going forward.
KL Property Index recorded a positive return of +7.3% in 1QCY23, outperforming KLCI losses of -4.9% in 1QCY23. The positive performance of the KL Property Index was mainly stimulated by a pause in OPR hikes in 2023 which provided short-term relief to the sector as unchanged OPR bodes well for application for a housing loan. The gains in KL Property Index were mainly led by small to mid-cap property developers. MIDF says the top five performers of the KL Property Index in 1QCY23 were Ewein Berhad (+79.7%), Iskandar Waterfront City Berhad (+55.6%), MCT Berhad (+45.8%), Sapura Resources Berhad (+44.1%) and Tanco Holdings (+35.8%).
According to data released by National Property Information Centre (NAPIC), the transaction volume of properties jumped by +29.5%yoy to 389,107 transactions in 2022. The spike in transaction volume was mainly supported by pent-up demand following the reopening of Malaysia’s borders in 2022. Note that transaction volume was subdued in 2020 and 2021 due to Covid-19 lockdown which restricted transactions of properties by foreign buyers. Residential transaction is the biggest contributor to transaction volume at 62.5%, followed by agriculture transaction at 21.1% and commercial transaction at 8.4%.
MIDF maintains NEUTRAL on the property sector. The loan application and loan approved data in February 2023 were a slight
positive to the sector and we see that further recovery in loan data would signal recovery in buying interest. Meanwhile, the house maintains NEUTRAL but with a positive bias on the property sector. MIDF remains positive on developers that target properties in the mid-market and affordable segment as buying interest is strong amid normalizing interest rate environment. Our top picks for the sector are Mah Sing Group (BUY, TP: RM0.7
