According to data released by Bank Negara Malaysia (BNM), loan applications for the purchase of property rebounded in May 2023 by +23%mom after a decline of -23%mom in April 2023. The figures rebound in May 2023 could be due to higher loan
applications following a break for the festive season in April 2023.
On a yearly basis, loan applications jumped by +18%yoy, bringing cumulative loan applications at RM246.5b (+4.3%yoy) in 5MCY13. The higher total loan application in 5M2013 indicates better demand for property. Nevertheless, buying interest on the property could be dampened slightly as Bank Negara Malaysia increased OPR by 25 basis points to 3% in May 2023.
Total loans approved for the purchase of property jumped by +18%mom in May 2023, reversing a decline of – 17%mom in April 2023. The higher approved loan in May 2023 was mainly underpinned by the higher loan application in May 2023 which was partially cushioned by a lower percentage of the total approved loan over the total applied loan of 44.8% in May 2023 (April 2023: 46.7%). On a yearly basis, approved loans rebounded by 18%yoy in May 2023 after a decline of -11%yoy in April
Cumulatively, the total loans approved stood at RM106.5b in 5M2023, increasing by 10%yoy which bodes well for the new property sales outlook for developers.
KL Property Index outperformed KLCI in 1HCY23 by registering a gain of 7.6% against KLCI’s losses of 7.9%. Property counters saw stronger trading interest following a pause in the OPR hike by Bank Negara Malaysia in January 2023 and March 2023 as a pause in OPR is expected to support buying interest on properties. Investment house MIDF thinks that the declining residential overhang in 1QCY23 following the reopening of country borders helped support sentiment on property stocks.
Meanwhile, the top five performers of property counters in 1HCY23 are Ewein Berhad (+210%), Yong Tai Berhad (+113%), Seal Incorporated Berhad (+96%), Tanco Holdings Berhad (+72%) and Eco World International Berhad (+54%)
Unchanged OPR in July 2023 a short-term relief to the sector. The unchanged OPR is positive for the property sector as buying sentiment is expected to remain healthy without a hike in OPR. Note that higher OPR would raise the financing cost of housing loans and hence dampen buying interest on the property. Besides, the unchanged OPR is expected to benefit property developers in terms of financing costs. Financing cost for property developers is expected to remain stable in the near term as some of the developers have considerably high exposure to floating rate debt.
The rebound in loan application and loan approved data in May 2023 is slight positive to the property sector as it signals demand for property remains supported while the new property sales outlook for developers is expected to be better. In a nutshell, we maintain NEUTRAL with a positive bias on the property sector. Top picks by the house include Mah Sing Group and Glomac Berhad
