The Malaysian House Price Index (MHPI) shows that residential prices across the country are stabilising, according to the central bank.
In Q4 2013, MHPI rose by only 9.6 percent compared to a higher growth of 12.2 percent a year ago. This is also the first time that the index was below 10 percent since Q3 2011, plus improvements were seen in most states and most categories of houses.
In addition, residential sales and new launches declined in Q4 2013.
“It’s possibly due to the wait-and-see attitude of some developers and buyers following the prohibition on developer interest-bearing schemes in November last year, further increases in real property gains tax in January this year, higher minimum purchase price for houses by foreigners, and uncertainties regarding the potential impact of the goods and services tax,” said Bank Negara Malaysia (BNM)
Statistics also revealed that 84 percent of mortgage borrowers only had one outstanding housing loan. This means the lion’s share of their home purchase are for own occupation, or medium to long-term investment.
Home owners also prefer to keep their property rather than sell it due to the drop in prices. This situation could potentially prevent a spike in defaults if the property were to experience a severe downturn.
In case of a default probability of up to 10 percent (current probability is about 2.5 percent) and price correction of 40 percent, Malaysian banks’ capital buffer still surpasses estimated losses by over five times, showed a test.
However, demand for houses still exceeds new supply by a huge margin, especially in major employment centres and the low- to medium-tier markets.
Factors causing this large gap include rising urbanisation, Malaysia’s relatively young population and general inclination to own a house
“Part of the mismatch in the market was due to rising land prices and construction costs that increased the incentive for developers to build high-end properties where the margins are higher,” it added.
Farah Wahida, Editor of PropertyGuru, wrote this story. To contact her about this or other stories email farahwahida@propertyguru.com.my
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