Views on property cooling measures

VARIOUS cooling measures introduced by the Malaysian government and Bank Negara Malaysia (BNM) to help curb escalating property prices has had little impact, said iProperty.com Malaysia and Singapore CEO Haresh Khoobchandani. Together with Brickz.com, the company analysed data from BNM and the Valuation and Property Services Department of Malaysia (JPPH) to examine if the measures introduced over the years actually impacted the residential and financial markets. theSun reports the study conducted.

“From the data we got, we saw that prices for residential property in Malaysia had been sky-rocketing since year 2000. Between 2008 and Q2 of 2009, following the sub-prime mortgage crisis in the US, which affected economies around the world, house prices experienced nearly no growth. The number of loans approved for residential properties also decreased the same year as the market moved funds away from the softening real estate market,” Haresh said.

Based on figures in the Malaysia Residential Loans and National House Price Index (HPI), it was learned that the annual quarter-onquarter national HPI began to increase the highest from 2011-Q1 to 2012-Q1.

In 2011-Q1, the HPI was at 149.1, while in 2012-Q1, the HPI was at 167. Thus, the difference shows an increase of 17.9 index points in 2011. For the same period, performance for residential loans approved was stable at RM20.4 billion. The data showed that the quarter-on-quarter HPI had slowed down to a growth of 15.3 index points between 2015-Q1 and 2016-Q1. Performance for approved residential loans also fell

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drastically by RM5.6 billion from 2015-Q1 to 2016-Q1. HPI however, continued to rise despite a drop in the amount of residential loans approved since 2014.

“In our opinion, the drop in loans approved was contributed by all the previous interventions introduced by Bank Negara and the government. The interventions did not reduce the property prices but did slow down the growth,” Haresh said.

Brickz.my founder Premendran Pathmanathan, who is also iProperty.com Malaysia’s data services general manager said that the measures introduced by the government, including removal of the Developer Interest Bearing Scheme (DIBS), had actually decelerated demand.

“Other factors that could also put tha brakes on demand could be due to the changes in real property gains tax (RPGT), revision in loan to value (LTV) curbs and also the introduction of the Goods & Services Tax (GST). Aside from this, the global uncertainty, weakening ringgit, and change in price (drop) of oil and gas has also played a role in this as well,” Premendran reasoned.

“The DIBS scheme only required an initial payment of 5% or 10% of the property price. So, purchasing property became an attractive option for investors. It was likely that the increase in the price of new properties from 2011, were the result of speculative buying due to the scheme,” Premendran said.

Haresh however, felt that the cooling measures had actually impacted the financial sector and also reduced negative sentiments of the oversupplied housing market. “If you look at the data, the price index for houses continued to climb at double digit rates, by 15.3 index points in Q1 2016, while the financial sector on housing loans fell 23.24%. The various measures introduced appeared to have consolidated the financial sector and reduced the negative sentiments of the oversupplied housing market,” he said.

“It is unlikely that prices will decrease, instead likely to stabilise or increase at a slower rate in coming years. This is primarily due to the fact that we have a growing young adult population and this is driving the demand for property, which in turn will continue to place upward pressure on prices.

“With the real estate industry now consolidating, the industry may shift their focus toward developments that apply to affordable living. Infrastructure such as transportation, energy and social infrastructure will help to increase economic efficiency and reduce the cost of living, thus making locations that once seemed expensive to live in now more affordable.”

In all, Haresh believes the above is why property buyers and investors are adopting a cautious approach and are being very selective in where and what they choose to purchase. “There is increased demand for affordable homes, particularly through a growing, young population looking for properties in the major urban centres. “While Malaysians are concerned about the rising house prices and affordability, property is still viewed the most attractive investment choice and this is due to capital growth opportunities. It is also more stable compared to other assets,” he said.

[Information and images from iProperty.com]