PETALING JAYA: The property sector is in for a better year amid some challenges. This should bode well for property companies in line with the pick-up in economic activities.
MIDF Research reckoned that stringent bank requirements remain a challenge for property companies.
This was considering that the percentage of total approved loans over total applied loans for the purchase of property hovered below 40% in February 2022.
Looking ahead, analysts and market observers agreed that the house price index (HPI) should stage a marginal recovery in 2022 due to the ongoing economic recovery.
According to the National Property Information Centre, the HPI in the country was subdued in the third quarter of 2021.
The HPI stood at 202 during the period, declining marginally from the HPI of 202.5 in the second quarter of last year.
“We think that the decline in the HPI could be mainly attributed to the adverse impact on the property market as a result of the Covid-19 pandemic.
“Meanwhile, preliminary HPI in the fourth quarter of last year showed that the index continued to decline.
“This was because the property market was plagued by weaker demand for property amid the pandemic,” MIDF added.
The research company is maintaining its “neutral” stance on the property sector.
This is premised on its view that property companies would see slightly better new sales outlook in 2022.
This is due to buying interest in property recovering, following the pick-up in economic activity.
That should offset the adverse impact of the absence of government incentives to purchase property as the House Ownership Campaign has ended, MIDF said.
In a nutshell, it is maintaining its “neutral” call on the sector.
“Our ‘buy’ calls on the sector are Mah Sing Group Bhd (target price or TP of RM0.80) and IOI Properties Group Bhd (IOIProp) (TP of RM1.29).
“We are positive on Mah Sing as we think its strategy of building an affordable range of properties should drive the new sales outlook.
“Meanwhile, we are also positive on IOIProp due to its undemanding valuation of trading at a steep discount of 72% to the latest net tangible assets of RM3.60 per share.”
The research house added that the sales outlook for IOIProp remained stable, underpinned by projects in Malaysia and China.
“Its hospitality and investment property division are expected to benefit from the economic recovery and the reopening of Malaysian borders,” it noted.
According to data released by Bank Negara, the total loan applied for the purchase of property inched up to RM28.6bil – 9.2% year-on-year (y-o-y) in February 2022 after growing by 5.4% y-o-y in January this year.
The increase in property loans was in line with MIDF’s expectation of a marginal recovery in property demand as economic activity normalised.
On a sequential basis, total loan application was lower – a fall of 17.1% month-on-month in February.
This was due to February being a shorter month.
Cumulatively, total applied loan for the first two months of 2022 was higher at RM63.2bil (7.05% y-o-y), indicating demand for property is recovering.
Meanwhile, total loan approved for the purchase of property was higher at RM11.3bil (9% y-o-y) in February 2022, in line with higher loan applications for the purchase of property.
Cumulatively, total loan approved for the purchase of property climbed to RM26bil (20.4% y-o-y) in the first two months of 2022, indicating an improving sales outlook for property companies this year.