Property Hunter Magazine August Issue 2014 | Page 17
Will Malaysia Rise From the Property Humdrum of 2014?
slowly beyond 2016 and 2017.
The market appears to be selfcorrecting slowly.”
Generally prices for properties
with good infrastructure and
amenities will continue to
climb however, transactions for
condominiums will drop slightly
as well as the rental market due
to oversupply, but this is seen to
be only a short term effect.
BNM Rulings Taking Effect
Recently the International
Monetary Fund (IMF) has said
that house prices in many
countries are still well above
their historical average relative to
income and rent.
Malaysia like some of these
countries has seen a rapid
increase in property prices over
the past four to five years with
the excessive speculation in the
property market driving property
prices to an artificially high level.
However, the property market is
still resilient and with the market
cooling measures introduced by
the Government last year, the
market will correct itself and see
growth in the coming years.
According to the Knight Frank
Global House Price Index,
released earlier, it shows that
while Malaysia’s housing prices
have risen by 8% in the first
three months of 2014 (1Q14)
compared to the previous
corresponding period last year
where the rate of growth had
slowed down.
Continued Growth
The first half of 2014 has been
relatively quiet as predicted
earlier, as the property market
has been absorbing the market
cooling measures.
Siva Shankar, President of the
Malaysian Institute of Estate
Agents (MIEA), explains, “2012
and 2013 saw a 6% to 7 % drop
in transactions in the market and
that this downwards slide will
reduce, making next year (2015)
somewhat flattish and there
on continue to rise upwards
The Bank Negara Malaysia (BNM)
rulings announced last year are
taking effect causing banks to
be more cautious in their loan
criteria and to tighten property
financing to buyers. Therefore,
buyers are seeing up to 60% to
70% in rejection rate at the first
instance of application.
According to BNM’s Monthly
Statistical Bulletin for March 2014,
in 1Q14, some RM25.4 billion in
property loans were approved
from RM47.6 billion applied for,
translating into a 46.6% rejection
rate in terms of loans value. In
comparison, 1Q13 saw higher
rejection rate at 54.6%.
However some markets like
Kuala Lumpur and Selangor are
seeing less overall transactions
yet higher total transacted
value. This marks a trend that
reflects the nationwide property
market trend — total number
of transactions dropping but
an increased transaction values
for the past three years, based
on the annual Property Market
Reports published by the
National Property Information
Centre (Napic), Ministry of
Finance.
Growing Interest in Secondary
Market
Interest has peaked in the
secondary market as the primary
market slows down due to the
cooling measures. Developers are
also holding back their launches
amid weaker market sentiment
and revisiting their development
plans to cater to current market
demands and trends.
Currently the secondary market
is becoming slightly more active
and prices in select locations are
now looking relatively attractive.
Buyers, are now turning their
attention to this secondary or
sub sale market, though there is
hefty down payment and higher
costs to acquire these properties
their prices are still comparatively
lower than newer launches.
In other words there is a
shortage of supply for secondary
properties making it attractive in
terms of capital appreciation.
Speculative Buyers a Threat to
the Market
The most worrisome factors for
the market are the speculative
short term thinking investors.
These are speculators who
bought directly from developers
with the intention of flipping
when the property is ready.
However, with the new ruling
where a 30 % real property gains
tax (RPGT) is being implemented
on first year disposals as well as
an oversupply, it seem that it is
them who are now at risk as they
have no holding power. They will
try to dispose their properties
either at a lower price or try to
rent it out, in either case they will
be competing with others in the
same location, creating a price
war.
In the worst case scenario
they cannot afford to pay their
mortgage instalments and the
banks are forced to auction off
their properties, affecting the
industry to a certain extent.
Serious investors won’t be
worried as they usually plan for
between three to 10 years, hence
they have holding power and will
not face such problems.
Overall Market Sentiments
Overall investors’ sentiments
looks to be very cautious; some
share the feeling that this year is
not a good year to invest or buy
properties as there are too many
uncertainties and are taking a
wait-an