BASED on data released by Bank Negara Malaysia, total loan application for purchase of property normalised to RM52.4 bil in June 2024 after figures in May 2024 increased to the highest level since April 2023. 

On yearly basis, loan application increased for three consecutive months by +3.9% year-on-year (yoy) in June 2024 after growth of +3.2% yoy in May 2024 and +15.3% yoy in April 2024, stated MIDF Research (MIDF) in the recent sector update report.

That brought cumulative total loan applications higher at RM307 bil (+3.3%yoy) in the First Half of Calendar Year 2024 (1HCY24).

The higher loan application shows that buying interest on property is stronger amid recovery in the property sector which is driven by the status quo of overnight policy rate at 3% and improving outlook for the property sector.

On a monthly basis, approved loan for purchase of property eased by 10.8% month-on-month (mom) to RM23.3 bil in June 2024, in tandem with the lower loan application. 

Meanwhile, approved loan was marginally lower on a yearly basis in June 2024 by -1.4% yoy following increase of +3.3% yoy in May 2024 and 15.8% yoy in April 2024. 

The lower approved loan in June 2024 was mainly due to lower percentage of total approved loan over total applied loan of 44.5% in June 2024 against that of 47.2% in June 2023. 

Cumulatively, total loan approved in 1HCY24 was higher at RM134bil (+4% yoy) which is in line with our expectation of better new sales outlook for developers in CY24.

“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,” said MIDF.

Note that IOI Properties Group (neutral, target price: RM2.25) has exposure in China and Singapore. S P Setia (BUY, target price: RM1.68) has exposure in Australia and UK while Sunway Berhad (neutral, target price: RM3.98) has exposure in Singapore and China. 

Based on sensitivity analysis of earnings to forex changes, the impact of every 1% strengthening of Ringgit is expected to have minimal earnings impact of less than 3% to the financial year 2024 earnings of the property companies. 

“Overall, earnings contribution of the property companies is largely from local projects hence we do not expect significant earnings impact from the appreciation of the Ringgit,” said MIDF.

MIDF sees a positive outlook for the property sector as underlying demand for property remains healthy. Besides, they expect property developers to report earnings growth in the upcoming second quarter for calendar year 2024 earnings.

This is on the back of higher recognition from property projects as labour shortage issues are resolved while earnings outlook is also supported by improving new property sales. 

“Hence, we reiterate our positive stance on the property sector,” said MIDF. - Aug 8, 2024

https://focusmalaysia.my/midf-healthy-demand-for-property-on-the-back-of-higher-recognition/