Affordable homes to drive loan growth up to 7%, says MIDF

‘We will see a wider range of people procuring loans when more affordable homes are made available’

By ALIFAH ZAINUDDIN / Pic By MUHD AMIN NAHARUL

The shift to fulfil affordable homes’ demand is expected to drive loan growth up to 7% from the current average of 5.2% to 5.5%, said Malaysian Industrial Development Finance Bhd (MIDF).

“We will see a wider range of people procuring loans when more affordable homes are made available, and that will likely be the case in 2018.

“In fact, the trend has been somewhat visible this year with a chunk of loans growth coming from mortgages,” MIDF senior analyst Imran Yassin Mohd Yusof said to The Malaysian Reserve on the sidelines of the MIDF Market and Economic Outlook 2018 briefing yesterday.

Despite the tapering off loan growth in October to 4.6%, loan demand for residential and non-residential mortgages, personal use, credit cards and working capital continued to rise within the same period.

Imran Yassin said the strong mortgage demand and approval trends are expected to carry on and will spillover into next year as property developers focus their attention on building more affordable homes.

Based on the National Property Information Centre report, a total of 130,690 unsold residential properties in the country in the first quarter of 2017 has triggered the deployment of pre-cautionary measures, including an indefinite moratorium on luxury development.

Despite motions against the freeze, the move has seen some progress in making private developers live up to their low-cost home promises and ease the shortages of affordable housing in Malaysia.

MIDF Amanah Investment Bank Bhd head of research Mohd Redza Abdul Rahman said if the supply of affordable homes can catch up with demand, both banks and developers will stand to expand.

He said the development in the property segment is expected to contribute positively to loan growth and boost the earnings of banking stocks next year.

Separately, MIDF said the FTSE Bursa Malaysia KLCI is estimated to hit 1,900 points in 2018, primarily driven by banking stocks and continued recovery in corporate earnings.

It said the local exchange’s underperformance in the past few months is due to the “pre-election effect” as higher gross domestic product (GDP) failed to bring the index on par with its Asean peers.

However, the research house expects Bursa Malaysia to gain on the “relieve rally” after the election.

“We looked back and discovered that the pattern is similar to that of 13th General Elections. Our market underperformed compared to our regional peers during election year. But right after the election, we recovered the pre-election discounts. This is the anecdotal reference that we have,” head of strategy and quantitative analytics Syed Muhammed Kifni Syed Kamaruddin said.

At the macroeconomic level, MIDF is projecting our GDP to expand 5.5% next year, while the ringgit will move higher against the US dollar to end at RM3.95 in 2018.