Khong & Jaafar Sdn Bhd managing director Elvin Fernandez expects Malaysia’s home market to remain flattish until 2017, due to economic conditions abroad and locally.
“It looks like it is going to be sort of flattish for a while and that’s not a bad thing. Not only this year but also extend into next year, because of global conditions and the economy. We were running at a higher gross domestic product growth, but now we’re not,” he said at yesterday’s Malaysian Property Summit Mid-Year Review 2016.
“There’s also the supply side, we have got a lot of supply at any one time coming in. Based on all of that, going forward, flattish is good, as long as it doesn’t drop; and an increase is not likely,” he added.
Last year’s property market downtrend continued in the first half of 2016 and will likely continue in the second half, said outgoing Valuation and Property Services Department (JPPH) director general Datuk Faizan Abdul Rahman.
“In terms of volume and value, the market has steadily declined since 2012. It is a steady decline but if you look at the House Price Index (HPI), in the fourth quarter of last year (4Q15), there was still an increase of about 7.2%,” he said.
JPP data showed that the growth in index points fell since Q3 2013 from 12.2% year-on-year to 7.4% in Q3 2015 and 7.2% in Q4 2015. With preliminary growth at 6.8% in Q1 2016, Faizan expects home prices to witness some correction.
“For this year, we have not finalised the HPI yet, but we expect the increase to be definitely lower than 7.2%. It all depends on the economy but I should think this year and next year, prices of properties will plateau off. It is good if the increase in property prices is tapped at 3% to 5%. Even at 7.2%, it is still high,” he said.
Meanwhile, the reduction in the cost of borrowing after the cut in Overnight Policy Rate (OPR) is not expected to significantly improve the housing market as lending guidelines remain stringent, said Datuk Siders Sittampalam, managing director at PPC International Sdn Bhd.
He noted the impact of the OPR cut on property transactions will only be very minimal as it will not drastically lower interest rate. In fact, there will not be much changes even if Bank Negara Malaysia cuts the OPR again later this year as it does not mean that more home buyers would qualify for loans.
Sarah Lim, head of equity research at Kenanga Investment Bank Bhd, underscored that the issue is lending liquidity, not interest rates.
To ease lending liquidity, Bank Negara will have to address lending practices like loan-to-value ratio caps, loan assessment methods, and valuation of properties, she said.
The tighter lending liquidity is caused by high loan-to-deposit ratio and high household debt, while banks appear to be ‘reducing’ exposure to loans related to property, said Lim.
For this year, she expects residential transacted values to dip by 2% on a flattish volume growth of 1% year-on-year.
Mangalesri Chandrasekaran, Editor at PropertyGuru, edited this story. To contact her about this or other stories email mangales@propertyguru.com.my
