BY LEE YAN LI
lylee@thestar.com.my
Bird's eye view of Mont Kiara.
THE government’s cooling measures and the rejection by banks for end-financing have resulted in a pessimistic outlook on the property market in the first half of this year.
However, property sales have risen about 19% in the second half of 2015 when compared to the first six months of the same year.
According to the Rehda Property Industry Survey 2H 2015, units launched in the first half and second half of 2015 have decreased from 10,829 to 9,938, although the market has seen improved sales performance, as 5,195 units (52%) were sold in the later period, compared to 4,371 units (40%) sold in first half of 2015.
The improving sales were reported mainly for the apartment or condominium units, which have seen an increase of about 136% from 779 units in the first half to 1,844 in the second, even though less units were launched. At the same time, the sales of single-storey terrace houses and low-cost or flat units have also increased significantly.
However, the market was seen suffering a slowdown, especially when compared to the days of people queuing up to grab newly launched properties.
Rehda president Datuk Seri FD Iskandar said that before 2014, the launched units could be sold out in a week, but it takes up to six months nowadays to reach 60% sales.
As more developers shifted their focus to lower priced housing projects, property prices were likely to see negligible increase.
Sixty eight percent of the respondents reported being on the pessimistic side on the market outlook for the period of the first half of 2016, while 28% remained neutral and only 4% expressed optimism.
However, they believed things could improve in the second half of 2016, as less than half (49%) were pessimistic, and 44% were neutral. At the same time, 7% were optimistic about the market, a significant increase compared to the earlier period.
For the second half of 2015, the top five reasons for unsold units were the difficulty of securing end-financing and loan rejections, unreleased units under bumiputra quota, low demand and interest, the existence of odd/corner/special units, and undesirable locations such as the proximity to T-junction.
The difficulty of end-financing and issue of loan rejection rates of 68% were the number one reason that resulted in the soft property market.
The increase was significant compared to the loan rejection rate of 52% during the first half of 2015, when unreleased bumiputra quota constituted the main reason of unsold units.
Unsold units in Kuala Lumpur and Johor were mainly higher priced units, while Pahang, Perak, Penang and Kedah faced difficulties in the affordable housing segment.
Challenges in financing
Rehda had urged Bank Negara to relax the terms of loan financing for first-time homebuyers who purchase affordable houses.
The factors of difficulty in financing included buyers’ credit history in CTOS and CCRIS reports, ineligibility of buyers’ income, lower margin of financing, banks requesting more documents and limited quota for low-cost or affordable housing.
While the banks have conventionally examined applicants’ net income for approval of end financing, it is important to consider the other earnings such as overtime and allowances as well.
The government should also consider reinstating the Developers Interest Bearing Scheme (DIBS) for first-time homebuyers of affordable housing properties, and 62% respondents agreed with the sentiment.
While Malaysia’s personal household debt at 86.8% of gross development product was considered one of the highest in the region, it was important to consider the segmentation of the debt.
The major component of household debt included residential mortgages (around 30%), car loans (around 20%) and credit card or personal debt. While residential properties gained value over the years, other segments would see a substantial or total loss. Bank Negara should encourage citizens to develop portfolios that build wealth.
Sixty three percent of the unsold units were priced above RM500,000 [46% (RM500,000 - RM1mil), 14% (RM1mil - RM2.5mil), 3% (above RM2.5mil)]. Properties below RM500,000 constituted 37% of the unsold units.
Residential properties continued to lead newly launched developments at reduced numbers, while commercial units recorded a slight increase.
The survey indicated that domestic buyers continued to lead the residential market, while buyers purchasing for investment purposes have decreased from 23% in 1H 2015 to 13% in 2H 2015.
Strata launches have overtaken landed properties by only 1%. Most strata properties were based in Selangor and Kuala Lumpur.
Sixty one percent respondents have reported increased cost of business operations up to 10%, prompting them to implement various cost-cutting measures.
Two thirds of the respondents noted that GST had impacted the housing prices, mainly due to an increase of operating cost.
About 76% of developers indicated that the market suffered a slowdown due to GST. Eighty six percent of the developers absorbed the corresponding increased cost to differing extents, while 14% chose to transfer the cost to the purchasers.
Rehda deputy president Datuk Soam Heng Choon said the property sector is not heading towards a crash, despite all the difficulties faced by developers and lower buying sentiment.
He cited the Asian Financial Crisis in 1997/98, in which the market had seen 50% buyers renegading from their purchases, prices suffered a sharp drop of around 30% to 40% and the phenomenon of rampant non-performing loans. However, he agreed that the current property market is going through a lull.
Savills Malaysia executive chairman Chris Boyd echoed the sentiment and listed a sharp increase in interest rate and a sudden drop in housing prices as indications of a housing market crash, which has yet to be seen in Malaysia.
However, the property market is expected to see an improvement in the second half of 2016, with a better market absorption rate for unsold housing units.
