Real estate sector well on its way to recovery

MIDF Research said buying sentiment on properties is expected to remain healthy.

PETALING JAYA: Analysts are optimistic about the outlook of the property market this year, on the back of stronger anticipated demand for properties and higher loan approvals.

MIDF Research in a report said buying sentiment on properties is expected to remain healthy going forward, as the landscape in general is seen to be improving.

“New sales for property companies are improving, which should translate into better earnings visibility going forward.

“Our top picks for the sector are Mah Sing Group Bhd and Matrix Concepts Holdings Bhd,” the research house said in a research note yesterday.

MIDF Research said it liked Mah Sing for the company’s quick turnaround strategy and high exposure to affordable homes via its M series projects.

“Its growing presence in the industrial-property segment will support earnings growth in the medium to long term.

“Meanwhile, we like Matrix Concepts as its new sales remain encouraging, while land bank expansion in Labu, Negri Sembilan, will further buoy earnings growth.”

The research house also noted that the dividend yield of Matrix Concepts is attractive at 5.6%.

For the recently concluded earnings reporting season, MIDF Research said four out of six property companies reported earnings that came in within its expectations – Sunway Bhd, Matrix Concepts, UOA Development Bhd and Mah Sing.

“Meanwhile, S P Setia reported earnings that came in above expectations as earnings in 2023 were lifted by a land-sales gain of RM110mil and better margins.

“On the flip side, the earnings of IOI Properties Group Bhd missed expectations as earnings contributions from China were weaker than expected.”

According to data released by the National Property Information Centre on Wednesday, the Malaysian property market’s transaction values rose by almost 10% to a record of RM196.83bil in 2023 from the previous year, with its growth momentum expected to continue this year.

Citing data from Bank Negara, MIDF Research noted that total loan applications for the purchase of property in 2023 were higher at RM605.3bil, up 5.7% year-on-year.

“The higher loan applications were supported by stronger demand for property as the outlook for the property sector continued to improve.

“Meanwhile, loan-application data was off to a good start in January 2024 as it was higher at RM51bil (up 46.5% year-on-year) as buying sentiment on property remains healthy.”

Additionally, MIDF Research said approved loans for purchases of property were strong at RM261bil (up 7.3% year-on-year) in 2023, driven by higher loan applications last year.

“The higher percentage of total approved loans over total applied loans of 43% in 2023 against 42% in 2022 also lifted approved loans in 2023.

“Meanwhile, approved-loan data in January 2024 remained encouraging as it grew by 40.8% year-on-year and 14.1% month-on-month to RM20.4bil, driven by higher loan applications. The higher approved loans bode well for the new-sales outlook for property developers.”