COOLING MEASURES TO REIN IN SKY-ROCKETING PROPERTY PRICES HAVE BEEN EFFECTIVE – IPROPERTY.COM MALAYSIA

Kuala Lumpur – The powerhouse of all things property related, iProperty.com Malaysia, the country’s No.1 property website and part of REA Group (ASX:REA), today revealed that the various cooling measures introduced by the government and Bank Negara Malaysia (BNM) to curb the escalating property prices has had little impact.

Haresh Khoobchandani, Chief Executive Officer of iProperty.com Malaysia & Singapore said that together with Brickz.my, the company analysed data from BNM and the Valuation and Property Services Department of Malaysia (JPPH) to study if the various cooling measures introduced over the years has impacted the residential and financial market.

He said: “From the data, we saw that prices for residential property in Malaysia have been sky-rocketing since 2000. Between 2008 to 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 in the same year as the market moved funds away from the softening real estate market.”

Referencing to the Malaysia Residential Loans and National House Price Index (HPI), he added that the annual quarter-on-quarter 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 MYR 20.4 billion.

He explained that the findings showed that when the National Higher Education Fund Corporation (PTPTN) began listing borrowers who have never paid back their loans into Central Credit Reference Information System (CCRIS), there was a 30% loan rejection in 2016. The findings also revealed that quarter-on-quarter HPI has slowed to a growth of 15.3 index points between 2015-Q1 to 2016-Q1. Performance for residential loans approved also fell drastically by MYR 5.6 billion from 2015-Q1 to 2016-Q1. HPI however continued to rise despite a drop in the amount of residential loans approved since 2014.

Table 1: National HPI and Housing Loans Approved for Q1 and Year-On-Year Change

Period National House Price Index for Q1 Change National House Price Index for Q1 Housing Loans Approved for Q1 (MYR ‘000) Change in Housing Loans Approved for Q1 (MYR ‘000 and percentage)
2007 123.4 + 5.7   8,516,435     694,703   8.88 %  
2008 128.7 + 5.3   13,589,771     5,073,336   59.57 %  
2009 129.6 + 0.9   11,669,915   1,919,856 14.13 %  
2010 136.9 + 7.3   17,788,834     6,118,919   52.43 %  
2011 149.1 + 12.2   20,363,494     2,574,660   14.47 %  
2012 167.0 + 17.9   20,371,468     7,974   0.04 %  
2013 184.9 + 17.9   23,985,479     3,614,011   17.74 %  
2014 202.7 + 17.8   25,418,331     1,432,852   5.97 %  
2015 218.5 + 15.8   24,305,339   1,112,992 4.38 %  
2016 233.8 + 15.3   18,657,200   5,648,139 23.24 %  

Source: Bank Negara Malaysia and Valuation and Property Services Department of Malaysia

Premendran Pathmanathan, founder of Brickz.my and also General Manager of Data Services at iProperty.com Malaysia, said the measures introduced by the government, especially the removal of Developer Interest Bearing Scheme (DIBS), has certainly slowed demand.

He said, “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’s likely that the increase in the prices of new properties beginning in 2011 were the results of speculative buying due to the scheme.

Khoobchandani concluded saying that the cooling measures implemented have impacted the financial sector and also reduced negative sentiments of an oversupplied housing market.

“The price index for houses continues to climb at double digits by 15.3 index points in Q1 2016, while the financial sector on housing loans fell 23.24%. The various measures introduced appears to have consolidated the financial sector and reduce the negative sentiments of oversupplied housing market. It is unlikely that prices will decrease but they are likely to stabilize 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 towards developments that are more focussed towards affordable living. Infrastructures such as transportation, energy and social infrastructure help to increase economic efficiency and reduce the cost of living, thus making locations that once seems expensive to live in nor more affordable.”

– MAILBAG

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