Hike In Housing Loans Applications Not Enough To Clear Overhang

Pavither August 6, 2019

Analysts does not expect the hike in housing loan applications to completely solve Malaysia’s property overhang problem.

Applications for mortgages increased 36.6 percent to RM25.6 billion in May from RM18.74 billion over the same period last year, reported The Malaysian Reserve.

Industry experts attributed the sudden surge to lower interest rates and the government’s Home Ownership Campaign (HOC).

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“I doubt the property overhang will be cleared very soon. It’s a buyers’ market now, and buyers have other options such as sub-sales and auction markets, especially those who are financially savvy,” said Dr Mohd Afzanizam Abdul Rashid, chief economist at Bank Islam Malaysia Bhd.

He noted that unsold properties would only be gradually cleared as household income increases over time, thus consumers with savings as well as good repayment record stand a better chance of purchasing their own home at some point in the future.

National Property Information Centre said Malaysia has 32,936 unsold completed residential units, valued at RM19.96 billion, in Q1 2019.

The figure is 30.7 percent higher from Q1 2018’s 25,193 units worth RM15.68 billion.

“We could expect a slight improvement (in the glut situation) due to HOC 2019 but it will be very marginal,” Dr Mohd Afzanizam said.

The RM25.6 billion in housing loan applications in May was the highest since October and November 2013, when applications for mortgages hit RM26.43 billion and RM25.97 billion respectively, showed Bank Negara Malaysia data.

Loans approved for the acquisition of residential property also jumped 32.3 percent year-on-year to RM10.76 billion in May.

The Overnight Policy Rate (OPR) cut in May this year may have also helped in the immediate aftermath.

However, the meteoric hike in May quickly moderated as housing loan applications dropped 17.8 percent month-on-month to RM21.05 billion in June, albeit the figure was still higher by 8.4 percent from last year.

Housing loans approved also fell 10.4 percent month-on-month to RM9.64 billion in June, although it was still up by 13.7 percent from June 2018.

“The overhang is still high, and concentrated at the upper house price ranges of above RM500,000 which may take a while to clear — until and unless there is significant improvement in affordability. Banks’ loans growths are likely skewed towards the sub-RM500,000 range,” said an analyst.


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