To be honest, this is the first time I have heard of an index called the The Malaysian House Price Index (MHPI). Since this is by Bank Negara, I am quite sure it is published periodically. The latest showed that residential prices across the country are stabilising. Last year, in Q4, MHPI rose only 9.6% and this is lower than one year ago, at 12.2%. This is also the first time that the index fell below 10% since Q3 2011. This is also complemented by the decline in new residential launches.
If you remembered one of my articles, I spoke about the cases where stronger developers which can delay their project would definitely choose to delay. No point in launching at a price which is too low margin and still risk not selling simply because of the ‘wait and see’ attitude of buyers. With the delay of new launches, Bank Negara has also increased the RPGT as well as higher minimum purchase price for houses by foreigners and the uncertainty surrounding the GST implementation. Do note that GST will at best maintain the property price but based on studies thus far, it is likely to add to the house prices albeit a low single digit percentage.
More importantly, it was also shown that MAJORITY of mortgage buyers, up to 84% borrowers has only ONE outstanding housing loan. This meant that the majority of them are buying for their own occupation or even medium to long term investment. This is considered a good thing because imagine if majority of buyers have two instead of one property? Personally, with this backdrop, it will be tough for certain properties to drop in price. In a test of default of up to 10% of all home owners and a price correction of up to 40 percent, Malaysian banks capital buffer is still sufficient to cover it by over five times.
I think the above is indeed a good news for the property market as a whole. Especially when the secondary market prices continue to lag behind that of primary or new launches meant that there is still a good buffer because not everyone need to buy new properties. They can always take a look at the secondary market and if prices are still considered high, after a while, they will lower their expectations and buy one which after a while would seem okay because imagine even if it is a low medium apartment but everyone who stays there are junior executives? After a while, the prices would definitely go up.
written on 23 June 2014
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