Home loan numbers drop in June


The decline in total applied and approved housing loans for the month of June against the previous month indicates cautious consumer sentiment and undersupply of suitable property.

The latest statistics released by Bank Negara Malaysia (BNM) noted that loans applied for purchase of residential properties stood at RM19.04 billion in June this year, 14.2% lower than RM22.19 billion in May 2017.

Loans approved by lenders (commercial banks, Islamic banks, and merchant or investment banks) for the same pur- pose also fell to RM8.5 billion in June 2017 against RM9.34 billion the month before.

On a year-on-year basis, loans applied for residential property purchases stood at RM17.93 billion in June 2016, while loans approved stood at RM8.01 billion.

Mercury Securities Sdn Bhd research head Edmund Tham said the drop in applied housing loans was due to minimum income thresholds, high debt levels and unattainable house prices.

“When people go to the bank, the sales staff will calculate to see if they are eligible for the loans. If the figures are not good, often they won’t even submit the application for approval, hence BNM sees less applications,” he told The Malaysian Reserve when contacted recently.

The issue of stringent filtering among banks is tied to income levels that do not match the current prices of property, as well as an inadequate supply of affordable homes.

He said potential buyers are also holding back on purchasing property due to high levels of debt caused by low disposable income, overdue tertiary education loans and a debt-to-service ratio that is based on net income rather than gross income.

“For some, there is no point in applying for a loan since there’s no way that it will be approved,” Tham said.

BNM announced last month that RM40 billion worth of housing loans had been approved in the first five months of 2017 to over 152,000 borrowers, of which three quarters were first-time homebuyers.

The central bank also said the approval rate for housing loans was stable at 74%, while banks said the success rate stood at 80%.

However, the Real Estate and Housing Developers’ Association said in March this year the rejection rate for housing loans was as high as 60%. It attributed the high success rate, as claimed by lenders, to filtering of those seeking housing loans before even receiving applications.

In response, BNM said its engagements with banking institutions showed that housing loans rejected by lenders mostly involved borrowers with high levels of pre-existing debt obligations that would “expose them to severe financial risk if further debt is extended”.

“Also, there have been less property launches of late, so fewer people are looking to buy houses,” Tham added.

Industry experts are expecting the property market to remain flat this year as economic uncertainties weigh heavy on buyers, leading to subdued reactions to new launches.

Property consultant and real estate solution provider Jones Lang Wootton said recently developers have focused too much on building luxury projects, for which there is naturally less demand due to the high prices of such properties, thus developers have now resorted to delaying launches in hopes of economic recovery.

In terms of the affordable housing segment, the subject remains a hotly contested topic, with various parties pointing out issues such as the lack of a defined price point for such homes and the less than ideal locations of these housing projects.