MIDF Research sees a positive outlook for the property sector as underlying demand for property remains healthy.
PETALING JAYA: Data released by Bank Negara shows that there is currently more interest in buying property, says MIDF Research.
Total loan applications for the purchase of property stood at RM52.4bil in June this year, a drop 10.4% month-on-month. Last month, loan applications for property had increased to the highest since April 2023.
On yearly basis, loan applications increased for three consecutive months by 3.9% year-on-year (y-o-y) in June 2024, after growth of 3.2% in May 2024 and 15.3% in April 2024. That brought cumulative total loan applications to RM307bil in the fist half of 2024 (1H24).
“The higher loan application numbers show that interest in buying property is stronger amid a recovery in the property sector which is also driven by the overnight policy rate (OPR) remaining unchanged at 3% and improving outlook for sector,” said MIDF Research in a report.
Total loans approved in 1H24 were higher at RM134bil, which MIDF Research said was in line with its expectation of better new sales for developers in 2024.
“We see a positive outlook for the property sector as underlying demand for property remains healthy.
“We also expect property developers to report earnings growth in the upcoming 2Q24 earnings season. This is on the back of higher recognition from property projects as labour shortages are resolved while earnings are also supported by improving sales for new property.”
The research house the impact of the strengthening ringgit is also expected to be minimal.
“We expect a neutral impact from ringgit appreciation on property companies as revenue and cost are mostly ringgit-denominated except for companies with exposure to overseas markets.
“Note that IOI Properties Group Bhd
has exposure in China and Singapore. S P Setia Bhd has exposure in Australia and Britain while Sunway Bhd has exposure in Singapore and China.
“Based on sensitivity analysis of earnings to foreign exchange fluctuations, the impact of every 1% strengthening of the ringgit is expected to have minimal earnings impact of less than 3% to financial year 2024 earnings for property companies,” the research house said.
MIDF Research said the KL Property Index is now trading below mean price-to-book after property counters succumbed to a severe sell-down last Friday and this Monday amid a broader market sell-off.
The research house sees the sell-down as a buying opportunity for investors as it believes property counters should trade above mean in the near to medium term.
The property upcycle, it added, is supported by the reduction in unsold residential units and growth in industrial property developments.
