First sign of property demand recovery seen in May

PETALING JAYA: The first sign of recovery in property demand (as measured by “Applied Loan for Purchase of Property” by Bank Negara Malaysia) was seen in May 2016 when it increased for the first time in 16 months, by 2% year-on-year and 5% month-on-month to RM25.79 billion.

“This is a small positive surprise to us as it could signal recovery in loan demand if the trend persists. Cumulative five months of 2016 (5M2016) applied loan is still 6% lower year-on-year against 5M2015 due to weak performance in the first four months,” MIDF Research said in a report last Friday.
However, “Approved Loan for Purchase of Property” was still lower by 13% year-on-year to RM9.91 billion, suggesting that the tighter lending environment has more than offset the slight recovery in demand.
“We will continue to monitor the increase in demand to see whether it is a sustained change in trend,” MIDF Research said.
It said property transaction value declined in Q1’2016 but that for affordable properties declined at a less severe rate.
According to the latest preliminary Property Market Report released by National Property Information Centre (Napic), property market transaction value in Malaysia declined by 18% year-on-year to RM32.0 billion in the Q1’2016.
The negative growth in transaction value is consistent with the 14% fall in volume to 80,029 units in the first quarter of this year.
“Further analysis of the data suggests market preference towards affordable houses of below RM500,000. As it is, transaction value for properties below RM500,000 declined 11% year-on-year compared with a 23% decline for properties worth RM500,000-RM1.0 million and a 20% decline for properties worth RM1.0 million and above,” it said.
The research house added that out of the eight property developers under its coverage, 25% or two (UEM Sunrise Bhd and Eastern & Oriental Bhd) reported earnings that were below expectations. Only Glomac Bhd managed to beat its estimates due to higher-than-expected billings.
“Overall, Q1’2016 earnings were mixed with two underperforming expectations and one exceeding expectations,” said MIDF Research.
The latest publication from Malaysian Institute of Economic Research (MIER) showed that Q1’2016 Consumer Sentiment Index (CSI) has recovered to 72.9 from its all-time low of 63.8 in Q4’2015. However, MIER mentioned that the CSI is still below the threshold level of confidence and job outlook clouds expected incomes among consumers.
“We believe that the data suggest some return of interest among property buyers but buyers are likely to remain price sensitive,” said MIDF Research.
It maintained a neutral call on the sector with UOA Development Bhd as its top pick.