Optimistic outlook for sector on rising sales

MIDF Research said that the stronger loan applications are positive for the property sector as it indicates stronger buying interest.

PETALING JAYA: MIDF Research says the demand for property will be stronger in 2023 due to the improving conditions in the country, an idea that is probably in contrast with public sentiment.

The numbers seem to back that opinion up however, as the research house revealed that loan-application data from Bank Negara has shown that buying interest in property remains encouraging.

Loan applications for property purchases grew by 23% year-on-year (y-o-y) to RM54bil in October after encouraging growth of 15.7% y-o-y the month before.

Cumulatively, loan applications for property purchases in the first 10 months of 2023 were higher at RM512bil, equivalent to 4.4% y-o-y growth.

MIDF Research said that the stronger loan applications are positive for the property sector as it indicates stronger buying interest.

Citing more Bank Negara data, the research house reported that, in line with the higher loan applications in October, approved loans also rose by 15.9% y-o-y to RM23.9bil for the month in review.

“On a monthly basis meanwhile, total approved loans were higher by 9.3%, mainly helped by a higher percentage of total approved loans over total applied loans of 44.3% in October 2023 against 40% in September 2023.

“Cumulatively, for the first 10 months of 2023, total approved loans were higher at RM224.8bil, which is 8.5% y-o-y growth. The higher loan approvals indicates stronger property sales, which should in turn support earnings growth of property developers in the near term,” the research house said.

Further soothing market concerns, data from the National Property Information Centre (Napic) showed that the overhang in residential property fell for the seventh consecutive quarter in the third quarter of 2023 (3Q23) to 25,311 units, declining from 26,286 units in the second quarter and 26,872 units in the first quarter.

The Napic numbers also revealed that Johor has the highest number of unsold residential properties at 4,500 units in 3Q23, from 4,717 units in 2Q23; followed by Perak at 3,625 units and Selangor at 3,296 units.

MIDF Research said that the continuous decline in unsold residential properties bodes well for the sector as it signals easing concerns about oversupply.

At the same time, Napic also revealed that the situation with serviced apartments improved in 3Q23, with a lower number of unsold serviced apartments at 22,152 units against 22,497 units in 2Q23, mainly led by the sale of more units in Johor at 12,646 in 3Q23 from 13,366 units in 2Q23.

Similarly, the number of unsold serviced apartments in Kuala Lumpur dropped to 4,792 units in 3Q23 from 5,450 units in 2Q23.

“In a nutshell, we see that the improving sales of serviced apartments particularly in Johor is positive for the sector and bodes well for recovery of the property market in Johor,” MIDF Research said.

The research house is maintaining a “positive” rating on property sector, underpinned by the improving situation in unsold residential properties and serviced apartments, coupled with its expectation of an unchanged overnight policy rate of 3% throughout 2024.

The research outfit listed Mah Sing Group Bhd and Matrix Concepts Holdings Bhd as its top selections for the sector, on the reckoning that property developers that focus on affordable homes should see robust new sales as demand for affordable homes is resilient.

“We also like Sunway Bhd due to the improving outlook for Iskandar Malaysia while the listing of Sunway Healthcare Group by 2027 should provide a catalyst,” it said.

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