Improving property sector a catalyst for banks


Rising inflationary environment would lead to an uplift in property valuation.

PETALING JAYA: The uncertainty on data centres from potential export limitations by the US government on artificial intelligence (AI) chips, has dampened the share prices of local banking stocks.

However, CIMB Securities Research has ruled our earnings downgrade risk for local banks.

On a more positive note, it saw a new catalyst for banks emerging from an improved property market. Rising inflationary environment would lead to an uplift in property valuation, ultimately increasing collateral valuation for loan portfolios.

“Historical evidence suggests this would have a positive effect in terms of lowering credit costs for the banking sector,” CIMB said in a report yesterday.

It noted that the property market for the nine-month period of 2024 (9M24) continued to sustain its performance, judging by the latest data for the third quarter of 2024.

Looking at the latest annual data for 2023, it said the number of property transactions at 399,008 was approaching the previous historical peak of 430,403 units recorded in 2011.

“To put things in historical context, the property segment had been relatively subdued following a series of regulatory measures from 2012 to 2014.

“More importantly, the value of property transacted rose to a new record high of RM197bil in 2023, exceeding the previous peak of RM163bil in 2014. This signals renewed investor confidence in the property sector,” said the research house.

Elaborating, it noted that the yearly value of property transacted had been falling since 2014, culminating in a trough of RM119bil during the 2020 pandemic.

“If we are to annualise the latest 9M24 value of property transacted of RM162bil, this would work out to a total annualised value of RM217bil, potentially setting another new record high for 2024.”

Unsold property units are also at a five-year low.

“The number of unsold units declined by double digits for two consecutive years, falling to 55,348 units in 2023 from a peak of 71,174 units in 2021

“Notably, the number of unsold units in 2023 is below the 2019 pre-pandemic level of 56,988 units,” the research firm added.

In addition, there is new requirement for Malaysia My Second Home participants to buy property under a revamped programme from 2024.

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