According to data released by Bank Negara Malaysia (BNM), loan applications for the purchase of property took a breather in April 2023, easing by -23%mom after two consecutive increases in February and March 2023. Recall that loan applications jumped to the highest in more than two years in March 2023 due to a recovery in buying interest following a pause in OPR hike in January and March. On a yearly basis, loan applications declined by -11.4%yoy following two consecutive increases in February and March 2023. Looking ahead, investment house Kenanga thinks that loan applications may stay weaker as Bank Negara Malaysia increased OPR by 25 basis points to 3% on 3rd May 2023 which may dampen buying interest on a property.
Total loan approved for the purchase of property declined by -17.8%mom in April 2023, in line with the lower loan application in April 2023. The decline was partially cushioned by higher loan applications and a higher percentage of total approved loans over total applied loans of 46.4% in April 2023 (March 2023: 43.5%). On a yearly basis, approved loans eased by 5.1%yoy in April 2023 after an increase of +19%yoy in March 2023. Cumulatively, the total approved loan in 4M2023 was higher by +6.3% which bodes well for the new sales outlook for property developers. Nevertheless, new sales momentum might turn weaker going forward as the loan application is expected to be weaker due to the OPR hike in May 2023.
The lower residential overhang in 1Q2023. According to data released by the National Property Information Centre (NAPIC),
a residential overhang of Malaysia remained on a declining trend in 1Q2023. Residential overhang continued to decline to 26,872 units in 1Q2023 after falling to 27,746 units in 2022 from 36,863 units in 2021. Selangor has the highest residential overhang units of 4,995 units, followed by Johor (4,759 units) and Kuala Lumpur (3,423 units). The continued decline in residential overhang could be attributed to higher buying interest on the property following the reopening of the economy and country borders.
The house sees that the improving residential overhang in 1QCY23 is positive for the property sector as that signals to ease of concern about the oversupply situation of residential properties in Malaysia.
The weaker loan application and loan approved data in April 2023 is slightly negative to the property sector as demand for loans is expected to be weaker going forward due to OPR hike in May 2023. Nevertheless, the improving residential overhang data in 1QCY23 is positive for the sector as it eases the concern about residential property oversupply in Malaysia. In a nutshell, Kenanga said it maintains Neutral but with a positive bias on the property sector.
Top picks for the sector are Mah Sing Group (BUY, TP: RM0.75) and Glomac Berhad (BUY, TP: RM0.43) as it remains positive on developers that focus on building projects in the mid-market and affordable segment.
The house sees resilient demand for affordable homes due to demand from first-time home buyers.
