Outlook continues to improve for local builders

PETALING JAYA: The property sector in Malaysia is seen to be recovering, as evidenced by the marginal uptick in loan application for property purchases.

According to MIDF Research, demand for properties in Malaysia is expected to improve in the coming months, in part, supported by Bank Negara’s recent decision to keep interest rates unchanged.

“We are maintaining our ‘neutral’ stance with a ‘positive bias’ on the property sector as we expect demand for properties to continue to recover gradually,” the brokerage wrote in its report.

“Besides, Bank Negara maintaining the overnight policy rate at 3% in September 2023 should underpin demand for properties,” it added.

MIDF Research noted that Bank Negara’s data showed loan applications for property purchases recovered marginally by 2.7% month-on-month (m-o-m) to RM51.8bil in July 2023 after declining 11% m-o-m in June 2023. On a yearly basis, loan applications were higher by 1.5% year-on-year (y-o-y) in July 2023 after a steep decline of 13.6% y-o-y in June 2023.

“We think that the marginal recovery in loan applications could be due to the pause in rate hikes by Bank Negara in July 2023,” it said.

Cumulatively, total loan applications in the seven months to July 2023 stood at RM348.8bil, up 0.9% y-o-y.

“The marginally higher total application indicates healthy demand for property,” MIDF Research explained.

It listed Mah Sing Group Bhd and Matrix Concepts Holdings Bhd as its top picks.

“We remain sanguine on property developers that focus on mid-market and the affordable segment amid resilient demand for affordable homes,” MIDF Research explained.

Meanwhile, the brokerage said it expected property companies to increase their exposure to industrial development, given the ongoing robust demand for industrial space in Malaysia.

It noted, for instance, S P Setia Bhd added three new industrial estates recently into its portfolio – Setia Fontaines Industrial Park in Penang, Setia Alaman in Klang, and Tanjung Kupang in Johor.

Eco World Development Group Bhd, on the other hand, saw encouraging sales from industrial properties, which made up 35% of new sales in the seven months to July 2023, and it subsequently proposed to acquire 403.8 acres of industrial land in Kulai, Johor from IOI Properties Group Bhd for a cash consideration of RM211mil.

Meanwhile, Sunway Bhd expanded its portfolio to industrial-asset development recently by acquiring 245 acres of freehold land in Kuang, Rawang, for development of an industrial technology park.

Mah Sing, on the other hand, set up a joint venture for industrial development recently due to growing demand for industrial property in Malaysia from buyers in China.

“Overall, we see growing contribution from industrial development to property companies in the near-term, riding on the solid demand for industrial assets,” MIDF Research said.