KUALA LUMPUR, March 23 — Malaysian financial institutions’ exposure to the domestic property market in 2015 stood at RM733.4 billion, representing 25.7 per cent of total financial system assets, says Bank Negara Malaysia (BNM).
In its Financial Stability and Payment System Report 2015 released Wednesday, BNM said banks continue to account for the bulk of the exposures, with about 90% of the exposures related to end-financing for the purchase of residential and non-residential properties.
“Growth in bank financing for the purchase of residential properties has remained strong, expanding by 11.7% with some moderation observed in line with the slower growth in the housing market,” it said.
For the residential property market, BNM said aggregate house price growth has continued to moderate since the second quarter of 2014, reflecting adjustments in investor demand for housing and the ability to borrow based on affordability assessments.
These, it said, were intended effects of the pre-emptive macroprudential and fiscal measures implemented since 2010, aimed at mitigating potential risks to financial stability from the strong growth in house prices, hence improving housing affordability, particularly for first-time home buyers.
“The average growth in house prices, measured by the Malaysian House Price Index (MHPI), has declined from 9.6% registered for the period for 2010-2014 to around 8.0% registered over five consecutive quarters since the second quarter of 2014.
“At this level, it remains above the long-term average house price growth of 5.5% for 1990-2009,” it said.
Meanwhile, BNM said financial institutions’ exposures to the non-residential property market accounted for about 27% of total exposures to the overall property market, representing less than 7.0% of total financial system assets.
While this is not particularly large, the central bank said developments in the non-residential property market have important implications for financial stability.
“This is due to the possible spillover to the broader economy and strong linkages with residential property developments which underpin a significant share of bank lending to households,” it said.
BNM said developments in the shops segment have typically mirrored those in the housing market, given that shops are seen among investors as an alternative investment to residential properties.
Despite slower activities in the segment, it said rental rates remained relatively stable, particularly in the Klang Valley.
In the first nine months of the year, BNM said both transaction volumes and values for shops decreased by 9.3% and 5.3% respectively.