PETALING JAYA: Home loan approval rates are expected to start picking up from the third quarter of this year, as foreclosure restrictions begin to ease as the economy gradually opens up.
UOB Kay Hian, in a report, noted that the mortgage approval rate saw a monthly increase of four percentage points in April and two percentage points in May, after the foreclosure.
“While this remains below pre-Covid-19 levels of over 40%, we don’t expect banks to tighten approval standards any further because they were quite strict even before the start of the pandemic.
“We expect the loan approval rate to pick up from the third quarter of 2021, as the backlog of loans is expected to ease as the economy gradually reopens.”
UOB Kay Hian said this will also translate to a better conversion rate for property sales, as transaction value historically moves in tandem with mortgage approval value.
Separately, the research house said developers with strong balance sheets were in buy mode to replenish their land reserves for future developments.
“We understand that these land deals are in more mature areas of the Klang Valley region.
“This signals moves by developers to reframe their strategies to focus on high demand / strategic locations for long term growth. For example, UEM Sunrise is buying land in the most desirable locations such as Petaling Jaya and Cheras, which could allow for a faster turnaround. That said, we do think cash calls might be minimal at this point. “
Additionally, UOB Kay Hian said that SP Setia, with its high debt load, surrendered 960 acres of land with an estimated disposal gain of RM 290 million.
“This is in line with the group’s strategy of monetizing its non-strategic land reserve to strengthen its cash flow.
“The group also identified nine plots of land totaling 1,295 acres with a market value of RM 1.96 billion for outright sales or on a joint venture basis.”
UOB Kay Hian also pointed out that the sale of Sunway’s healthcare unit stake in a robust valuation provides better visibility for Sunway Healthcare Group’s (SHG) expansion visibility and timeline. initial public offering.
“SHG could see its cumulative profits with an annual growth rate of 20-25%, given its continued expansion, and that would contribute about 22% of Sunway’s profits in 2023 from 3% in 2020.
“We believe that SHG’s strong growth trajectory could help Sunway build a formidable engine of growth and increase Sunway’s valuation over time.
“We potentially anticipate more asset monetization activity in the real estate sector amid the soft market outlook.”
UOB Kay Hian said major risks to the real estate industry include a prolonged foreclosure that would further weaken the economic outlook and consumer sentiment on big-ticket items; slower-than-expected progress billings, increased cost of building materials, and write-downs of receivables and completed inventories.