Interest for affordable units fuels loan applications

Rise in residential loan approvals may be due to developers realigning their business strategy to the market


The average loan-to-approval ratio for residential purchase is rising despite the property sector’s sluggish performance, worries over a property bubble and high prices for homes across major cities.

TA Securities Holdings Bhd analyst Thiam Chiann Wen said the rise in residential loan approvals could be due to developers as they realigned their business strategy and developed more affordable units to cater for the demand.

“The market is going through a consolidation period with residential prices bottoming out. A strong uptick in the property market might be on the horizon, but still largely dependent on the overall market and economic sentiment.

“Additionally, interest rate is seen to be accommodating for buyers with a possible 25 basis points hike, which would has minimal impact in terms of monthly mortgage commitments,” she told The Malaysian Reserve.

Latest monthly figure issued by the central bank showed total loans applied for the sector in October stood at RM21 billion, the amount approved was RM9.1 billion and the amount disbursed was RM8.11 billion.

In October last year, the amount applied, approved and disbursed for residential purchase stood at RM18.14 billion, RM8 billion and RM6.58 billion respectively.

Property consulting firm, Knight Frank Malaysia Sdn Bhd MD Sarkunan Subramaniam said competitive and reasonable price points for new projects and higher end-financing are the boosts for the housing sector.

“People are seen to be adjusting well with the banks’ lending requirements. The current sentiment could translate to a better property sales performance compared to a year ago,” he said.

He also believed regulating financing is an efficient measure to ensure responsible construction of residential units instead of stop construction order for new developments.

Sarkunan expects more buyers to buy houses instead of further declines in the property prices.

“With household debts reducing, as well as more products being offered at competitive prices, the interest and demand from buyers would definitely improve,” he said.

Exastrata Solutions Sdn Bhd chief real estate consultant Adzman Shah Mohd Ariffin said the boom in residential properties priced below RM400,000 had encouraged more buyers, especially the younger purchasers to enter the market.

“These people want to occupy these units and exit the rental market. They are also becoming more innovative in obtaining financial backings. A lot of buyers in the affordable segment are combining their household income instead of a single-loan application to enhance their chances of getting loans,” he said.

Data from the Valuation and Property Services Department (JPPH) revealed that in the first half of 2017 (1H17), about 153,000 transactions worth RM67.82 billion were recorded, representing a 5% rise in value compared to the 12% drop recorded in 1H16.

The National Property Information Centre reported that approximately 30% of new housing developments were priced below RM250,000 in 2015 and 2016.


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