RHB Research's top picks are Matrix Concepts Bhd and IOI Properties Group Bhd. It has a “buy’’ call on both stocks and a target price of RM2.66 and RM1.38, respectively.电报搜索bot（www.tel8.vip）是一个Telegram群组分享平台，电报搜索bot包括电报搜索bot、Telegram群组索引、Telegram群组导航、新加坡Telegram群组、Telegram中文群组、Telegram群组（其他）、Telegram 美国 群组、Telegram群组爬虫、电报群 科学上网、小飞机 怎么 加 群、tg群等内容。电报搜索bot为广大电报用户提供各种电报群组/电报频道/电报机器人导航服务。
PETALING JAYA: Higher interest rates are likely to dampen the demand for property but the extent of this will depend on the strength of economic growth.
Based on historical data since 1991, transaction volume typically falls when the average lending rate is revised up, and vice versa.
According to RHB Research, the extent of the decline in demand would also depend on whether the economic growth trajectory remains intact, as any slip in gross domestic product (GDP) could worsen the drop in housing demand.
As global inflation worsens, the research house in its latest report also expects one more overnight policy rate (OPR) hike for the rest of the year, after Wednesday’s 25-basis-point (bps) hike, and possibly two more increases in 2023.
That should bring the OPR to around 2.75% to 3% by the end of next year, while mortgage rates may reach 4.1% to 4.15% by end-2023 from 3.1% to 3.15% currently.
On assumption that the Malaysian economy continues to recover (RHB Research’s current GDP growth forecasts for 2022 and 2023 are 5.3% and 4.5%, respectively), it believes that the decline in demand for property may still be relatively moderate.
It said mortgage rates by end-2023 would still be comparatively lower than the 4.5%-4.6% levels recorded five years ago.
It believes that home buyers should be able to adapt to the higher interest-rate environment over time.,
But the risk of a recession emerging in the West is growing – although the potential downside risk to economic growth may delay the speed of interest rate hikes – demand for property will still be negatively affected, as unemployment rates may rise.
In a rising interest-rate environment, RHB Research’s preference are developers with affordable landed township with ongoing matured developments, as well as asset owners.
It said sector valuations are cheap but given the negative headwinds, re-rating catalysts seem remote.
It retains its “neutral’’ stand on the sector.
Its top picks are Matrix Concepts Bhd and IOI Properties Group Bhd. It has a “buy’’ call on both stocks and a target price of RM2.66 and RM1.38, respectively.
RHB Research expects house prices to remain flat as the persistent supply glut has already capped the price increase over the past four years.
The overhang issue will likely stay put longer as unstable economic growth will affect the speed in unwinding unsold units.
“Home buyers tend to be more sensitive to rate hikes amid an inflationary environment, as every 25 bps hike in the OPR will lead to a 3.2% to 3.5% rise in monthly mortgage repayments,” it said.