ECM Libra warns that the property sector would definitely take a beating if the influenza A reached Malaysia, similar to what happened during the SARS outbreak in 2003.

THE number of property loans approved in March was higher than expected but it is still too early to turn bullish on the sector, analysts said.

Loans approved for residential properties turned positive that month for the first time in six months. It grew by 10.7 per cent from a year ago.

"Despite the positive news, it is still too early to be bullish. While conditions are favourable for property ownership, sentiment - which is a major factor in buying decision - remains below neutral level.

"It is still too early to tell whether buying activities could be sustained for the remaining months of the year," ECM Libra Investment Research said in a note to clients recently.

It would take a convincing bottoming of the global economic contraction to boost sentiments, it added.

There was a 49.1 per cent increase in approved residential property loans and a 31.1 per cent increase in non-residential loans in March compared with a month earlier.

"While we expected aggressive sales promotions by developers since late January 2009 to have positive impact on property sales and loan approvals, (this is) much stronger than our expectation," ECM remarked.

The higher loan approvals may also have been driven by consumers refinancing their existing mortgages.

ECM noted that incentives to buy property are more compelling now as the average lending rate is at a record low of 5.16 per cent.

Also, developers and banks are absorbing significant amounts of upfront costs such as legal fees, stamp duties and interest costs during the construction period. Sales declined in the previous months mainly because prospective buyers had taken a "wait-and see" approach given the high inflationary environment and deteriorating economic outlook.

ECM kept a "neutral" stance on the property sector, saying that unless there is a full-blown swine flu outbreak in Malaysia, most bad news have already been factored in.

It said the property sector would definitely take a beating if the flu reached local shores, similar to what happened during the SARS outbreak in 2003.

Its top stock picks are Sunway City and Sunrise.