MIDF Amanah Investment Bank Bhd (MIDF Research) has maintained its POSITIVE stance on the property sector, citing a resilient buying interest and potential benefits from the Johor-Singapore Special Economic Zone (JS-SEZ) and the Johor Bahru–Singapore Rapid Transit System (RTS).

The research house's top picks for the sector remain Mah Sing Group (Buy, TP: RM2.09) and Eco World Development Group (Buy, TP: RM2.11).

Property loan applications had a slow start in January 2025, declining 12.3% year-on-year (yoy) to RM44.8 billion, following three consecutive months of growth from October to December 2024. On a monthly basis, loan applications fell 5.1% month-on-month (mom), which MIDF Research attributed to seasonal factors such as school holidays and the Chinese New Year period.

The research house expects applications to remain subdued in February due to the shorter month but anticipates a rebound from March onwards.

Approved loans for property purchases also softened, dropping 7.8% yoy to RM18.8 billion in January 2025, marking the first decline in seven months. This was largely in line with the decrease in applications, while the loan approval ratio adjusted from 50% in December 2024 to 42% in January 2025. Approvals are expected to stay weak in February before picking up in March in tandem with improving applications.

Earnings in the fourth quarter of calendar year 2024 (4QCY24) were mixed across the sector. Sunway Berhad, UOA Development, and Eco World Development Group posted earnings that exceeded expectations, driven by stronger-than-anticipated progress billings. Meanwhile, Mah Sing Group and S P Setia recorded earnings that were in line with expectations.

However, IOI Properties Group and Matrix Concepts missed forecasts due to weaker contributions from property development and slower progress billings. Overall, the sector's earnings grew by an average of 5% yoy, supported by stable billings and lower costs.

Property sales for FY24 were generally in line or better than management expectations, especially for companies that benefited from land sales. Sunway Berhad achieved sales of RM3 billion, surpassing its RM2.6 billion target, and has set a higher RM3.6 billion goal for FY25.

Eco World Development Group also outperformed with RM4.07 billion in sales, driven by RM626 million in land sales, and has set a FY25 target of RM3.5 billion. On the other hand, S P Setia and Eco World have taken a more conservative approach, setting lower sales targets for FY25 as land sales significantly boosted their FY24 figures.

Despite an increase in residential property overhang to 23,149 units in 4QCY24 from 21,968 units in 3QCY24, MIDF Research noted that the overhang remains below the three-year average of 27,000 units. The increase was mainly due to higher unsold units in Kuala Lumpur, which reached 4,234 units.

However, Johor's property market showed signs of improvement, with its residential overhang declining to 2,964 units from 3,030 units, while the overhang of serviced apartments in the state also decreased to 10,624 units from 11,810 units.

Looking ahead, MIDF Research expects Johor's property market to benefit from the JS-SEZ and RTS projects, while increasing demand for data centres and industrial properties will unlock land value for developers. Additionally, the unchanged Overnight Policy Rate (OPR) at 3% is expected to support buying interest in the sector.