Improved loan approvals signal better property sales and demand
KUALA LUMPUR: Loan approvals for the purchase of property (ALPP) in Malaysia are on an upward trend which could indicate that property developers’ sales should improve against last year, analysts observed.
MIDF Amanah Investment Bank Bhd’s research arm (MIDF Research) in a recent report, pointed out that this is the seventh consecutive month of year-on-year (y-o-y) increase in approved loan and this could mean that there could be an improvement in property sales this year.
“In our view, the higher approved loan disbursed into the market is a good leading indicator that property transactions value have increased and hence property developers sales should naturally improve,” it opined.
“Based on Bank Negara Malaysia Monthly Statistical Bulletin for July 2017, ALPP has increased eight per cent y-o-y to RM11.3 billion.
“The increase is mainly driven by the 24 per cent increase in loan application which implies that demand has improved significantly,” it said.
Hence, it believed that the uptrend of better sales for developers remain intact. It noted that for the first seven months of 2017 (7M17), approved loan grew by 10 per cent y-o-y to RM74.1 billion.
While a monthly basis, ALPP declined two per cent month-onmonth (m-o-m), MIDF Research believed that this was due to seasonal factor.
Aside from that, the research team pointed out that according to the latest Property Market Report released by National Property Information Centre (NAPIC), Malaysia property market transaction value has improved eight per cent y-o-y to RM34.5 billion in the first quarter of 2017 (1Q17).
“By segment, the increase is from the property with price range of ‘RM500,000 to RM1 million’ (an increase of seven per cent) and ‘RM1 million and above’ (an increase of 16 per cent).
“We believe that this is due to better loan approval rate for buyers for property price above RM500,000 where buyers tend to have sustainable income stream to support their loan application,” it said.
The research team also believed that the data reflects demand recovery among consumers due to stable ringgit and employment outlook.
It said, “Against 4Q16, there is decline of 30 per cent q-o-q in property transaction value but we are not overly concerned as it is due to seasonal factor.”
Besides that, MIDF Research highlighted that consumer sentiments have also improved for the last few months. It noted that the latest publication from Malaysian Institute of Economic Research (MIER) showed that 2Q17 Consumer Sentiment Index (CSI) has improved to 80.7 from 1Q17’s 76.6 and 2Q16’s 78.5.
“We gather that consumer incomes current and expected incomes are steady and improving. For employment, the outlook is still soft but has been inspiring. We believe that the data suggest that the demand outlook for property among the potential buyers has improved and this should translate to better sales in 2017,” it commented.
MIDF Research also noted that Malaysia House Price Index (HPI) growth is currently stable at 180.9 in 1Q17 although it is still lower than the five-year average growth of 9.4 per cent.
“Among the key states, the highest y-o-y growth was recorded in Kuala Lumpur (an increase of 7.9 per cent to 191.5) and Selangor (an increase of seven per cent y-o-y to 183.1).
“This is followed by Johor’s 5.1 per cent y-o-y and Penang’s 5.1 per cent y-o-y growth. We believe that the outlook for property price growth is better in Greater KL (KL and Selangor) due to the support from urbanisation factor,” it added.
Overall, MIDF Research is ‘positive’ on the current trend in Malaysia’s property market.