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Property Sector Hit By Cooling Measures


Mortgage application in Malaysia has receded in the past few years, indicating a slower demand for properties, according to Faizul Ridzuan, Chief Executive Officer of SAR Capital Sdn Bhd.

Based on the central bank’s latest statistics, total loan applications in the property sector contracted by 10 percent in Q1 2015 as compared to the same period two years ago.

“For example, in the first quarter of 2013, the value of loan applications was RM77 billion. However, the figure fell to about RM69 billion in Q1 2015,” he said. This RM8 billion drop in the loan application is equivalent to the sale of 26,660 residential properties costing RM300,000 each.

For the first eight months of the year, housing loan application fell by 6.13 percent from the corresponding period in 2014.

“This shows the effectiveness of the cooling measures imposed by the government since 2010 to cool down the heating property market,” Faizul told The Malaysian Reserve (TMR).

Another factor that has reduced the number of applications is Bank Negara Malaysia’s stringent lending guidelines, which made it harder for potential borrowers to acquire housing loans. On average, 30 percent of mortgage applications are rejected based on TMR’s earlier reports.

In addition to the declining mortgage applications, home prices also slid by 4.7 percent during the first quarter of 2015. On a year-to-date basis, it has dipped by 3 percent, noted RHB Research Institute Sdn Bhd.

Despite the lower number of housing loan applications and weaker prices, RHB Research Senior Analyst Loong Kok Wen Loong opined that the cooling measures are necessary to regulate the prices of residential properties.

“The property developers are not making losses even though property demand has been sluggish. This is actually a healthy adjustment,” she added.