Improvements are seen in residential loan indicators for January 2017, whereby residential loans applied and approved data came in at 3.4 and 12.5 per cent year on year (y-o-y) respectively despite loans-to-deposit ratios (LDR) remaining at a record high at 89.8 per cent.

For residential loans applied, this marks the third consecutive month of positive year to date y-o-y movements while for residential loans approved data, this is the first positive month of growth in two years, which is very encouraging.

The team with Kenanga Investment Bank Bhd believe this could be largely driven by higher supply of affordable homes in the market from the government and private sector.

"In terms of the ratio of property loans applied to approved, it was still relatively low at 41 per cent, with property loans to total banking system approvals ratio is still lethargic at 34 per cent" it added.

Kenanga Research's industry survey still indicates that banking liquidity to the sector remains challenging although some industry players have cited that ‘quality buyers' are emerging, improving the odds of loans approvals.

Overall, property sales growth is starting to look healthier as Kenanga Research's universe is indicating five per cent y-o-y growth for FY17 to FY18E, thanks largely to Sunsuria Bhd, Eco World Development Group Bhd and IOI Properties Group Bhd, which are showing significant growth while the others are mainly flattish.

"We expect overall Malaysia residential sales, the biggest driver of the property market, to see flattish changes in transacted values in 2017.”

This also means that the odds of developers missing their sales targets are less likely this year, it added.

"As investors are forward looking, they pay less attention on earnings and turn their attention towards headline sales numbers, which some are seeing growth while others are largely flat.

"In fact, this year we may see developers exceeding sales targets, which will be much welcomed after the lull over 2015-16. At this juncture, it is too early to say which developers will positively surprise and the critical check-point is if developers can strongly deliver sales in 1H17. Hence, we make no revisions to our developers' sales assumptions or estimates for now.”

Although the sector is still lacking catalyst, Kenanga Research called on investors to "ride on the broad market sentiment now”, particularly on developers with risks that have been mostly priced-in.