A good friend who’s a property investor said that with the Overnight Policy Rate (OPR) rate down, this will spur the property market. This was the earlier article: Lower mortgage rates, lower FD rates loh. While I cannot say I totally disagree with her statement but I have to say that the OPR adjustment downwards is NOT because Bank Negara Malaysia (BNM) wants to spur the property market. If I am wrong, any BNM officer please do correct me yeah.
The OPR adjustment is a pre-emptive measure because the BNM may have seen that the economy needed a boost especially with happenings all over the world today. Remember, when the world economy is not growing fast enough and there’s all these tensions created by that largest economy, then we need to think ahead. If you like to know what’s happening to the world economic growth, click here.
More importantly, everyone must understand that if property market is booming but the economy is not doing well, these transactions are purely speculative in nature. Property transactions should only happen because people have a stable salary, saved money and needs a home sweet home. In brief, more businesses decides to expand and thus creating more jobs and this in turn meant more people have money which they could spend and then the economy moves upwards.
It’s also not an easy decision for BNM because a lower rate meant that some retirees who rely on their savings in Fixed Deposits will have to adjust their spending slightly too. A lower rate will also help to encourage people to put their money into better investments versus just leaving them in the bank for example. This is like a boost for the whole economy which is not a bad thing. If people starts to do the wrong thing; using the money to speculate on properties for example, then BNM may adjust back the rates upwards.
Again, all these are monetary policies. Need a brief understanding, read here: “Monetary policy consists of management of money supply and interest rates, aimed at achieving macroeconomic objectives such as controlling inflation, consumption, growth, and liquidity.” If we read the whole definition statement, there’s no mention of property at all. This is really about the economy, about our economy yeah. Happy understanding.
Next suggested article: Rental as a determinant of property price. Sounds clearer.