Upward pressure on house prices are due to structural factors – BNM

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In a report from Bank Negara Malaysia today (24 June), reported in The Star, it said that most of the house price increase can be explained by structural factors. Until to date, ‘demand continues to outpace new supply of houses by a large margin, particularly in the low to medium-priced segments and in major employment centres’  Let me tell you that this is very true. My article about a medium priced condo in Penang garnered a few thousand views within hours of publishing it just last month.

Besides that, Malaysia’s demographic of a relatively young population and labour force, the never ending urbanisation as well as the fact that owning a house is considered a good plus point meant that strong demand is sustainable and definitely will continue to outstrip supply. Nevertheless, mismatch has happened because developers tend to like to build units of higher price as this gives them higher margins. If you intend to blame the developers, be reminded that every single business in this world exist because they want to maximise the profit they can get from a certain segment that they compete in.

Fortunately for some of these buyers, there has been an increase in the supply of and access to financing for the purchase of affordable housing via PR1MA, MyHome and My First Home schemes. There are also many affordable housing from state governments too. An important point to note is that the government’s earlier measures to reduce the credit-fuelled speculative purchases has pushed down the number of borrowers with three of more outstanding housing loans to only 3%. This was previously 15.8%!  It means only 3% of all housing loan borrowers are having three of more outstanding housing loans today.

BNM said the proportion of outstanding housing loans with loan-to-value (LTV) ratio above 70% has also gone down slightly to 46.6% from 50.1% in 2012. As usual, with the direction from Bank Negara, it has become harder to get loans and the assessment now covers the level of development in a specific location, population density, status of overhang, existing and potential demand, and the number and value of turnover of properties within the surrounding areas.

In one sentence, statistically it seems everything is okay and where property loans are concern, the sector does seem to be resilient in the even of any sudden decrease in pricing. Advice remains, if you are buying for your own home today, do not wait. In fact there is no need to wait for new launches, try secondary ones too.

written on 24 June 2014

Next suggested article:  En bloc sales, property market and maturity readiness

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