Malaysia Property Market Expected To Remain Flat In 2017

Property Market Expected To Remain Flat In 2017

The property market in Malaysia is expected to remain flattish next year due to uncertainties in the global economies, said experts.

However, Elvin Fernandez, the organising chairman of the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS) said this may not be a huge disadvantage to property owners and buyers.

“Flattish is good… Because it means yields are still reasonably alright and people are not going to easily default on their loans, unlike during the Asian financial crisis,” said Fernandez in a report published by The Star.

In terms of monetary measures, Kenanga Investment Bank thinks that the Overnight Policy Rate (OPR) will sustain, and even if Bank Negara Malaysia (BNM) cuts the OPR further, it would unlikely spur lending to the property sector.

Adjustments to the 70% loan-to-value (LTV) ratio cap on third home purchases are also unlikely to be announced in Budget 2017, because those buying third homes are investors or speculators rather than genuine home buyers. Therefore, increasing the LTV cap may send the wrong message to the general public.

Lowering or removing the real property gains tax (RPGT) can be detrimental for the property market as it may cause a panic-sell, which would further worsen the oversupply situation.

However, increasing the withdrawal limit from the Employees Provident Fund (EPF) Account 2 (30% of EPF account) could encourage home ownership considerably. However, this measure may require EPF to conduct long-term studies before implementation due to long-term repercussions on future retirees.

Due to the sluggish outlook, PEPS said that the number of property launches has reduced. However, prices of residential properties in good locations are expected to hold. There are also increased demand for affordable homes because the market is dense with first-time homebuyers.

The various cooling measures introduced by the Government has resulted in greater prudence among developers, banks and property buyers, said Kenanga.

According to Datuk Faizan Abdul Rahman, the director-general of Valuation and Property Services Department (VPSD), residential property values and volume have been declining at a steady rate since 2012.

However, the demand for affordable housing has picked up, while sales of properties over RM500,000 has declined in 2016.

He added that the BNM’s recent cut of the OPR rate by 25 basis points to 3% is a good thing for the domestic property market because the interest rates would be reduced and terms of borrowing will cost less for buyers.

[Source 1] [Source 2]

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