Jan 2016 : Whopping 62 percent loan rejection

2016 is starting to look like an extremely bad year for property market Malaysia. In an article in theheatmalaysia.com, it was reported that the loan rejection for residential property was 62 percent! The total rejected loan is RM9.42 billion. If a comparison was made between the total loan applications for December 2015 and January 2016, the actual amount for January 2016 was higher! Quoting numbers from Bank Negara Malaysia, total loan applications in December 2015 was RM14.88 billion and this increased to RM15.27 billion in January 2016. The rate of approval for January 2016 was lower by 20.4 per cent.

I have not yet read about any particular bank where the loan growth was negative in 2015. According to Standard & Poor’s Ratings Services (S&P), after an average loan growth of 10 percent for the past 5 years, Malaysian banks loans growth will moderate to between 5 – 6 percent. Its (S&P) credit analyst Ivan Tan forecast a gradual increase in non-performing loans (NPLs) to 2.0%-2.5% over the next two years, from about 1.6% in the latest Bank Negara Malaysia report of November 2015. This increase in NPL is manageable and the Tan said that the credit fundamentals of Malaysia’s banks remain stable over the next 18-24 months and has sufficient capitalisation and liquidity to withstand downside pressure.

While this assessment showed that the banks are resilient, it also meant that with rising NPLs, the banks are going to be much more cautious during loan approvals. Besides that, I must share what my friends in the banks are saying. These days, the credit ratings of buyers are getting worse. It’s getting harder to just approve because the risk of default is going to be higher. More importantly, are the buyers really buying within their capability instead of aiming one level higher? Is everyone skipping secondary properties altogether? Is everyone only buying at popular areas at a premium? Of course, last but not least would be BNM’s stricter guidelines for second and third properties and also the abolishment of developer interest-bearing schemes (DIBS).

I believe banks are also getting uncomfortable because a large number of high-end condominiums are flooding the market since 2015 and more are coming in 2016. Cautiousness aside, I believe buying with an end in mind is more important. That potential that we have to hold for some time is going to be there. Someone I trust very much said, ‘lowest point has yet to be reached.’ Keep reading and please do let me know of any great deals yeah.

written on 4 Mar 2015

Next suggested article: Negative thoughts but contrary actions?

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