Its analyst, Jessica Low, said the overall outlook for the property sector is improving slowly especially in the Johor market, given the decline in residential overhang there and potential revival of the Kuala Lumpur-Singapore high-speed rail project.
“That is expected to benefit property developers with exposure in Johor namely Sunway with 1,632 acres of land in Johor, Eco World Development with 1,000 acres land in Johor and Mah Sing with 1,120 acres land in Meridin East.
Other property developers in Johor that have strong outlooks include IOI Properties, Glomac and SP Setia, she added.
Weak loan applications
According to Bank Negara Malaysia’s data, loan applications for the purchase of property had declined 11% month-on-month (m-o-m) in June, after experiencing strong growth (23%) in May.
“The decline in loan applications in June could be due to normalisation as the data in May was likely boosted by pent-up demand following the Hari Raya celebrations,” Low said.
She added that the weaker figures could also be due to the impact of the overnight policy rate (OPR) hike by 25 basis points in May.
“On a yearly basis, loan applications declined by 13.4%, bringing cumulative loan applications to RM297 billion in the first half of 2023.
“Moving forward, loan applications are expected to grow stronger after BNM paused its rate hike in July,” she said.
Meanwhile, total loans approved eased by 5.8% in June owing largely to the lower number of loan applications. However, it rose by 5.4% year-on-year despite the lower loan applications.
“In a nutshell, we see that the healthy level of total approved loans should translate into a slightly better new sales outlook for property developers,” she said.
Downgrades and upgrades
MIDF Research has downgraded Eco World Development Group to “neutral” from “buy” due to limited upside with a target price (TP) of 96 sen from 87 sen previously.
It has also reverted its call on UOA Development to “neutral” from “trading buy” with a TP of RM1.65 from RM1.91 previously.
As for top picks, the research house has placed “buy” calls on Mah Sing and Glomac with respective TPs of 83 sen and 47 sen, respectively.
“We see developers that focus on mid-market and affordable segments should continue to do well in the long term as demand for affordable homes remains resilient,” she concluded.