Too early to see decline in house prices


IT IS still too early to see the impact of the Covid-19 pandemic on Malaysian property prices, despite the apparent increase in unemployment rate and fall in GDP.

Jones Lang Wootton ED Prem Kumar (picture) said the six months moratorium on loans has helped mitigating the immediate impacts of the virus outbreak on house prices.

“It is still too early, especially since the moratorium on loans provides a buffer for a period of six months. Even though people may have lost their jobs or their employment income may be affected, the fact that they do not have to service their loans for six months provides short-term holding power,” he told The Malaysian Reserve recently.

He added that loans refinancing due to lower interest rates does not appear to be a main direction at the moment, although some significant elements of restructuring of loans will be pursued by borrowers whose income have been impacted.

Bank Negara Malaysia has imposed a six-month moratorium on loan and financing payments from April to September 2020 to ease the burden of consumers and businesses due to the toll from the Covid-19 pandemic.

Among the measures announced include an automatic six-month loan moratorium to all individuals and small and medium enterprise borrowers, excluding credit card balances which can be converted to term loans of not more than three years with interest cap of 13% per annum.

Besides that, rescheduled and restructured loans need not be classified as credit-impaired and banks are allowed to draw down a capital conservation buffer of 2.5%, operate liquidity coverage ratio of below 100%, as well as reduce regulatory reserves to 0%.

Malaysian Institute of Estate Agents president elect Chan Ai Cheng said all the cooling measures implemented by the government to control property pricing over the years have helped curb over speculation of the market.

“Prices will adjust if there are owners who are in need to offload quickly.

“In established locations where owners have lived for many years, prices are very unlikely to fall, as firstly, they are mainly owner occupiers and secondly, they would have very much paid off most of their loans,” she said.

She added that property values in prominent locations will very likely hold despite the crisis.

Prem, however, said there is greater bias for a downward price adjustment at the current juncture, including properties in prominent locations, as rentals are already facing downward adjustments.

“This specific trend is anticipated to continue in the immediate future, especially for the next three to six months,” he added.

Chan expected the demand for rental will remain steady as people will more likely rent than making a purchase decision during uncertain times.