12/12/2017
【Property sector under recovery!】
Property sales are poised to grow in 2017 after three consecutive months of year-on-year increase in approved loans.
Based on Bank Negara Malaysia’s Monthly Statistical Bulletin for March 2017, approved loans for the purchase of property (ALPP) has increased 3% year-on-year to RM11.43 billion. The increase is mainly driven by the 20% increase in loan application which implies that demand has improved significantly.
Note that the ALPP numbers have shown a third consecutive month of positive growth year-on-year, we believe that the uptrend of better sales for developers has just been confirmed.
For the first quarter of 2017 (1Q17), approved loans grew 9% to RM28.62 billion. On a monthly basis, ALPP surged 35% month-on-month due to a 40% increase in loan applications. In our view, the higher approved loans disbursed into the market is a good leading indicator that the value of property transactions has increased, hence property sales should naturally improve.
Property transaction value showed trend reversal in 4Q16. According to the latest Property Market Report released by the National Property Information Centre, Malaysia’s property market transaction value improved 60% quarter-on-quarter and 38% year-on-year to RM49.6 billion in 4Q16. By segment, the highest growth in transaction value is seen for “commercial” properties priced above RM1 million. We believe that the data reflects demand recovery among consumers due to the stable ringgit and employment outlook.
Consumer Sentiment Index improved in 1Q17. The latest publication from the Malaysian Institute of Economic Research shows that 1Q17 Consumer Sentiment Index improved to 76.6 from 4Q16’s 69.8 and 1Q16’s 72.9. We gather that consumers are generally more optimistic and have indicated their cautiously ambitious spending plans. We believe that the data suggest that the demand outlook for property among the potential buyers has improved and this should translate into better sales in 2017.
House Price Index (HPI) growth was stable at 5.6% in 4Q16. HPI growth remains positive as it grew by 5.6% year-on-year to 243.3 in 4Q16 although it is lower than the five-year average growth of 9.1%. There is also some decline quarter-on-quarter but we think that this should be temporary as the Malaysian economy has picked up. Among the key states, the highest year-on-year growth was recorded in Selangor (+8.2% year-on-year to 244.5). This is followed by Johor’s +7.7% year-on-year, Kuala Lumpur’s +5.3% year-on-year and Penang’s +0.7% year-on-year. We believe that the outlook for property price growth is better in Greater Kuala Lumpur (Selangor and Kuala Lumpur) due to the support from the urbanisation factor.
