Approved property loan recovery may not sustain

PETALING JAYA: Net approved property loan for January year-on-year (y-o-y) may be up 6% to RM8.72 billion in January 2017, but MIDF Research opined that it does not signal a sustained recovery for the segment.
The research house said despite the increase in approval rate y-o-y in January 2017, it was still at a very low level of 40.5%.
Loan demand, as measured by applied loans, remains weak ,declining 1% y-o-y to RM21.53 billion as the continued weakness in the ringgit in January affected consumer sentiment.
“Note that the 6% improvement in applied loan was attributed to a 7% y-o-y increase in approval rate, which more than offset the 1% decline in demand,” MIDF Research noted.
The house price index (HPI) rose 5.3% y-o-y to 241.6 in Q3’2016. Although it was lower than the five-year average growth of 8.9%, it still maintained the same 5.3% y-o-y growth registered in Q2’2016.
Among the key states, the slowest y-o-y growth was recorded in Penang (+3.4%). Selangor HPI growth was better at +7.5%, followed by Johor (+5.5%) and Kuala Lumpur (+5.1%).
MIDF Research believes that the outlook for property price growth is better in Greater KL due to support from the urbanisation factor.
According to the latest Property Market Report released by National Property Information Centre, Malaysia’s property market transaction value declined 6.3% quarter-on-quarter (q-o-q) to RM30.8 billion in Q3’2016. The lower transaction value is consistent with the fall in transaction volume by 8.5% q-o-q to 76,456 units.
MIDF Research believes that the data reflects slow demand recovery among consumers due to ongoing concerns about the weak ringgit and uninspiring employment outlook.
Following the drop in Malaysian Institute of Economic Research’s consumer sentiment index from 73.6 points in Q3 to 69.8 points in Q4, MIDF Research gathers that consumers are expecting rising prices to intensify while shopping plans are still conducted selectively.
“We believe that the data suggests that the demand outlook for potential property buyers remains soft in 2017 and they are likely to remain price sensitive,” it added.
MIDF Research is maintaining a “neutral” call on the property sector with UOA Development Bhd as its top pick.
“We like UOA for its decent property sales where launch of its properties at an affordable price range is well received by genuine home buyers. Besides, we also like its healthy balance sheet with net cash position and decent dividend yield of 5.9%,” it noted.