According to data released by Bank Negara Malaysia, loan applications for the purchase of property declined by -11%mon in June 2023 after strong growth of +23%mom in May 2023. The decline in loan applications in June 2023 could be due to
normalising of loan applications as data in May 2023 was likely boost by pent-up demand post break for Hari Raya celebration. Besides, the weaker figures could also due to impact of OPR hike by 25bps in May 2023. On yearly basis, loan application declined by -13.4%yoy, bringing cumulative loan application to RM297b in 1HCY23. The loan application in 1H2023 was flattish at +0.8%, indicating marginally better demand for property.
Moving forward, the loan application is expected to grow stronger as Bank Negara Malaysia paused a rate hike in July 2023.
Total loan approved for the purchase of property eased by -5.8%mom in June 2023 mainly due to lower loan application. On a yearly basis, the total approved loans increased by +5.4%yoy despite lower loan applications mainly due to a higher percentage of total approved loans over total applied loans of 47.7% in June 2023 (May 2023: 45%). Cumulatively, the total approved loan in 1HCY23 was healthy at RM131b which represents a growth rate of +9.2%yoy. In a nutshell, the healthy total approved loan should translate into a slightly better new sales outlook for property developers.
Narrower discount for property companies due to improving property scene at Johor. The property scene for Johor is
improving with lower residential overhang units and the potential revival of the High-Speed Rail project. MIDF sais this is expected to benefit property developers with exposure to Johor namely Sunway Berhad with 1,632 acres of land in Johor, Eco World Development with 1000 acres of land in Johor, and Mah Sing with 1120 acres of land in Meridin East. Similarly, property developers that have ownership projects in Johor are also expected to benefit from a better property outlook for Johor namely IOI Properties with Bandar Putra Kulai township, Glomac Berhad with Sri Saujana and Saujana Jaya township in Johor, and S P Setia with Setia Tropika, Setia Eco Gardens and few more townships in Johor.
In view of the improving outlook for property developers, MIDF is narrowing its RNAV discount and target prices for property companies under our coverage. Post adjustment to valuation, the house downgrade Eco World Development Group to NEUTRAL from BUY due to limited upside.
And also revert TRADING BUY call to NEUTRAL on UOA Development as a bumper dividend of 20sen per share goes
ex today. Meanwhile, the house also maintains a BUY call on Mah Sing Group, IOI Properties Group, Glomac, and S P Setia.
