KUALA LUMPUR: The hike in the interest rate and expectation of further interest rate hikes are slight negative for the property sector, according to MIDF Research.
Bank Negara raised its overnight policy rate (OPR) by 25 basis points to 2.25% on July 6.
MIDF said the hike in OPR is slight negative to the property sector as that would increase house instalment of property buyers marginally and reduce the affordability of property buyers.
“We estimate housing loan instalment for a loan of RM500,000 to increase by about 3% for every 25 basis points increase in OPR. Nevertheless, the slight negative from interest rate hike is expected to be partly cushioned by Government incentives to support buying interest,” the research house said.
The government recently announced the i-MILIKI program which offers a 100% stamp duty exemption for first-time homeowners who purchase properties priced RM500,000 and below.
“Overall, we see the normalisation of interest rate with expectations of further OPR hike could drag slightly on property demand going forward,” MIDF said, adding that property loan applications surged in June.
According to data released by Bank Negara, the total loan applied for the purchase of property jumped by 35.4% year-on-year (YoY)and 15.8% month-on-month to RM46.5bil in June 2022.
Property loan application growth returned to positive territory in June after two consecutive declines in April and May.
“Note that total loan application value in June 2022 is at multi-year high which we think could be due to better buying sentiment and pent-up demand post reopening of economic activities.
“Besides, we think that the higher liquidity from EPF withdrawal in April 2022 may have helped support buying interest on properties.
“Cumulatively, total loan applied for purchase of the property was higher at RM238.3bil (5.8% YoY),” it said.
MIDF has maintained its “neutral” view on the property sector with “buy” calls on Mah Sing (Buy, Target price: RM0.74) and IOI Properties Group
(Buy, Target price: RM1.29).
“We remain positive on Mah Sing as we see its new property sales outlook would underpin by its quick turnaround strategy on affordable home segment.
“We also like IOI Properties Group due to its undemanding valuation of trading at 73% to its NTA per share of RM3.60. Earnings outlook of IOI Properties Group is expected to underpin by higher contribution from property investment and leisure & hospitality divisions,” MIDF said.
