KUALA LUMPUR: The imbalances in the property market pose significant risks to the overall economy in the event of a shock, said Bank Negara Malaysia governor Tan Sri Muhammad Ibrahim.

He said Malaysia has a record high unsold residential properties of about 130,690 units until the first quarter this year, mainly for houses priced above RM250,000, while the vacancy rate for office space is expected to be at 32% in 2021.

With about 140 malls entering the market in key states by 2021, he said this would exacerbate the oversupply and potentially becoming more severe than during the Asian Financial Crisis (1997).

According to the International Monetary Fund, historically housing booms have been followed by busts about 40% of the time, which is associated with longer economic downturns and larger output losses compared to equity market.

Muhammad said the central bank had raised this issue to banking institutions and the exposure of the financial institutions on this sector was still at prudent level but property oversupply could impact other sectors.

He said borrowers continued to have access to home financing, especially first-time home buyers.

Housing loan approval rate stood above 70%, while the rejection rate remained below a four-year average at 23.3%, he said, adding that financing for speculative house purchases remained muted. — Bernama