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While the property overhang has dropped, it remains high and therefore a cause for concern, said a research house.

KUALA LUMPUR: Applications for property loans bounced back in August from a 12.5% month-on-month (m-o-m) decline in July despite a 25 basis point (bps) rise in the overnight policy rate (OPR) to 2.25%.

Data released by Bank Negara Malaysia (BNM) shows that applications for property loans rose to RM53.4 billion, a 4.5% m-o-m increase over July.

MIDF Research attributed the recovery to the reopening of the economy in April, when restrictions on most activities were lifted and borders reopened.

The OPR was raised by another 25bps to 2.5% at the last meeting of BNM’s monetary policy committee on Sept 8.

MIDF said that on a yearly basis, applications for property loans surged 66.1% year-on-year (y-o-y) in August due to the low base effect caused by the lockdown imposed in August 2021.

The research house said the total loan approved for the purchase of property increased marginally to RM23.3 billion or 2.4% m-o-m in August 2022, bouncing back from a decline of 9% m-o-m in July 2022, mainly due to the increase in the number of applications.

On a yearly basis, the total property loan approved during the month surged 93%, also thanks to the low base in August 2021.

Added to that is the higher approval rate in the same month in 2022 compared with 2021. In August 2022, 43.6% of loans applied for were approved, up from 37.5% in the previous corresponding period.

“Overall, the higher approval rate is in line with our expectation of a marginal recovery in new sales for property developers,” it said.

Citing the data released by National Property Information Centre, MIDF said the residential overhang eased to 34,092 units in the second quarter of the calendar year 2022 (2Q22) from 35,592 units in 2Q21, also attributable to the reopening of the economy.

“Although the residential overhang is showing signs of easing, we see that the property market may still be partly weighed down by the lingering high overhang issues as residential overhang units remain high in 2Q22, staying above 30,000 units,” it added.

As such, MIDF has maintained its “neutral” call on the property sector, naming Mah Sing Group Bhd as its top pick for the sector with a target price of 74 sen per share, and IOI Properties Group Bhd, maintaining its “buy” call with a target price of RM1.29 per share.