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

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

Property Investment always start with knowledge. Equip ourselves with more here.

0 Responses

  1. Those who try to curb speculations of properties always come up with really ridiculous ideas, like foreigners can only purchase landed property above RM2 million. This has actually push prices of properties value below RM2 million to scale higher with probably mutually agreed pre occupational renovation advance of RM500K to the foreigners just to facilitate the condition to purchase. Those studio (appropriate for foreigners) will not be able to sell to foreigners thus the prices should be based on per sq foot basis

  2. Actually upward pressure of price is not due to any structural issue. Its just willing buyer willing seller. If Buyer want to pay higher, then of course the price get higher la. If no buyer buying right now because price too high, then price will dropped. Price actually dropping in secondary market but nobody buying. We can see the problem in 2015 more clearly when more DIBS condo are VP’ed.

    1. Simple explanation. Let’s say buyer see some hot selling property. Then buyer will buy when see other buy. Something like kiasu. That is during 2011 to 2013. But now the price is at a level that 95% unable to get loan. If want to kiasu also cannot because cannot get loan.

      1. Now the property price has hike up so much, subsales, some even has double the price when they bought from developer. Many people advise not to buy now because of comments why do you want to buy a property at the highest level….lets said a link house now cost 800k, how much it can increased and whether still many people afford to buy with the increase price….

        1. Hi Erin, it is very true. There are some developments which I feel is way too overpriced. However, RM800,000 for a link-house depending on the area is not considered overpriced. It is highly unlikely that those who owns a RM800,000 link house and staying with their family will be willing to sell for anything lesser moving forward even during crisis because their mortgage will likely be based on their original price. Most of the overpriced ones are high rise luxury condos, not so much of landed ones which are typically bought for stay with family. Note: Just a personal opinion. No one can tell you who’s most right and who’s most wrong. Markets are mostly driven by emotions backed by some statistics. Never the other way around. cheers.

      2. I agree with Chia that linked house will be more resilient than condo. Condo price crash is imminent. Do not buy condo now.

  3. Hi
    Agreed that price is getting expensive even for the new launching high rise condo in Penang, it could easily touch 500k and above for entry level. furthermore, there are more and more being built, I really wonder that is there such of demand from market to cater for this development OR the new property is built for future plan based on statistic data? so, there is whether a real demand or not, that is not guarantee.

    1. Last few years, condo sold out very fast and most Penangites already have 2 to 3 condo. So the reason current new launching condo in Penang unable to sell because no buyer (since as I already said, all buyer already depleted because most Penangites already have 2 to 3 condo units). So to answer your questions, there is actually no demand for Penang condo in terms of people who want to stay. That’s why you a lot of empty condos.

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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