Overhang Lowest Since 2018, Property Market Back In Vogue

According to data released by Bank Negara Malaysia, total loan application for purchase of property increased to RM52.9b in April 2024 after two consecutive declines in February and March 2024. On monthly basis, total loan application in April 2024 was marginally higher (+1.8%mom), bringing total loan application in 4MCY24 higher at RM195.9m (+3.1%yoy). The higher loan application is in line with expectation of stronger demand for property in 2024 on the back of improving outlook for property sector and status quo of OPR at 3%

MIDF in its analysis of the sector noted that the approved loan for purchase of property returned to growth of +15.2%yoy in April 2024 after two consecutive declines in February and March 2024. The higher approved loan was mainly driven by the higher loan application. On monthly basis, approved loan recorded double-digit growth of +10.3%mom in April 2024 despite marginal growth in loan application, mainly helped by higher percentage of total approved loan over total applied loan of 46% in April 2024 against 42.7% in March

The house opines that the loan approval should remain encouraging going forward on the back of higher loan applications. That should translate into better new sales prospects for developers.

MIDF maintains POSITIVE on property sector as it noted that the outlook for property sector continues to improve with further decline in residential overhang in 1QCY24 to the lowest level since 2018 which should support buying interest
on property.

Meanwhile, recent ventures into the data centres industry by developers should provide a new source of
recurring income for the developers and support earnings growth in the long term. Hence, it maintains the POSITIVE
stance on the property sector. Top picks for the sector are Mah Sing Group (BUY, TP: RM1.83) and Matrix Concepts
(BUY, TP: RM2.00). The house likes Mah Sing on its long-term outlook on the back of its strong exposure to
affordable residential segment. Besides, its venture into the data centre will spur earnings growth in the long term. The
balance sheet of Mah Sing is strong with low net gearing of 0.06x. Meanwhile, as for Matrix Concepts this is due to its positive earnings growth and better new sales prospects as new sales from its Bandar Sri Sendayan remains resilient, driven by healthy demand for affordable landed homes. Besides, its land acquisition in Labu is expected to be completed in October and will further drive earnings growth beyond FY27. Meanwhile, the dividend yield of Matrix Concepts is attractive at 5.5%.

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