Property sector on track for recovery on reopening of the economy

The improvement in loan application and approval rate in March for home purchases indicates thst the property market is well on its way to recovery this year.

According to MIDF Research, the data suggested that property demand has rebounded in line with its expectation of a marginally better outlook for new property sales.

“We maintain our view that the new property sales outlook is expected to be slightly better in 2022 due to reopening of the economy.

Nevertheless, we think that the property developers may face cost pressure in 2022 due to rising raw material costs,” the research house said.

As such, MIDF Research maintained its “neutral” outlook on the property sector.

Its “buy” calls for the sector are Mah Sing Group Bhd, with a target price of 80 sen, and IOI Properties Group Bhd, with a target price of RM1.29.

“We remain positive on Mah Sing as we see better earnings outlook in 2022 due to the higher progress billing and contribution from the glove manufacturing segment.

“Besides, new property sales are expected to be better in 2022 due to its strategy of building an affordable range properties,” MIDF Research explained.

“We are also positive on IOI Properties Group due to its undemanding valuation of trading at steep discount of 72% to the latest net tangible assets of RM3.60 per share.

"We expect earnings recovery for its investment property division as well as the hospitality and leisure division in 2022 due to the resumption of economic activities and reopening of national borders,” it added.

Data released by Bank Negara showed the total loans applied for the purchase of property was flat in March at RM44.9bil, up 0.1% year-on-year (y-o-y), after growing by 9.2% y-o-y in February.

That brought cumulative total loan applied for purchase of property to RM108.1bil, up 4.06% y-o-y in the first quarter of 2022 (1Q22). The higher applications for property loan were driven by the demand for property following reopening of the economy.

According to Bank Negara, the total loan approved for the purchase of property rose 17.8% y-o-y to RM16.4bil in March after growing 9% y-o-y in February.

Cumulatively, the total loan approved for the purchase of property increased 19.4% y-o-y to RM42.4bil in 1Q22. This was mainly driven by higher loan applications and rising percentage of total approved loan over total applied loan of 39% in 1Q22 against 34% in 1Q21.

Posted on: 12th May 2022

Source: The Star