Housing loan applications dived 72% in April as virus takes hold

Loans applied for passenger cars also saw a decline of 89.3% YoY to RM642.8m in April before rebounding by 313.2% in May


MORTGAGE applications plunged 72.1% year-on-year (YoY) to RM6.67 billion in April 2020, reflecting caution over making big-ticket purchases amid economic uncertainties in the wake of the Covid-19 pandemic.

According to data from Bank Negara Malaysia (BNM), housing loan applications totalled RM23.88 billion for the same month last year.

Institute for Democracy and Economic Affairs senior fellow Dr Carmelo Ferlito said borrowers will not get themselves involved with a housing loan in the near term following uncertainty in the economy as well as concerns on another round of movement restrictions.

“This situation is increasing inequality, in fact, while houses could be a ‘safety investment’ in this moment, only those who do not require a loan would feel safe in jumping into this kind of investment.

“Those in the lower income group will choose prudency and remain conservative because of the fear of a further worsening of economic conditions,” he told The Malaysian Reserve.

RHB Investment Bank Bhd senior economic analyst Ahmad Nazmi Idrus said demand for housing loan applications should slightly recover from April, while government fiscal measures such as the stamp duty and real property gain tax exemption would further assist in recovery.

“But the economic prospects are still uncertain amid new waves of infections, so we could see continued decline in the months ahead.

“The sentiment has improved from April but is rather weak compared to its long-term trend. If new waves rise and a possibility of a new round of restrictive measures, then we could see loans applied fall further,” added Ahmad Nazmi.

Loan applications marginally increased by 56.8% to RM40.45 billion in May 2020, corresponding to the easing of the Movement Control Order (MCO) and the gradual reopening of the economy.

The MCO beginning March 18 had severe implications on the economy as non-essential businesses were forced to temporarily close down. The national unemployment rate spiked to 5% in April, the highest since 1990, before jumping to 5.3% in May as the number of jobless Malaysians rose to 826,100.

The previous low for applied housing loans was in February 2009 with just RM6.77 billion, while the lowest-ever amount of housing loans applied was in February 2006 at RM3.2 billion.

Bank Negara Malaysia (BNM) had imposed a six-month loan and financing payments moratorium from April to September 2020 to ease the burden of individuals and businesses affected by the pandemic. Yesterday, Prime Minister Tan Sri Muhyiddin Yassin said the moratorium will be extended by three months for those who lost their jobs due to the pandemic and are still unemployed.

Similarly, loans applied for passenger car purchases saw a decline of 89.3% YoY to RM642.8 million in April from RM5.99 billion registered in April 2019.

The application then rebounded by 313.2% to RM2.66 billion in May. The lowest amount of loan applied for cars ever recorded was RM2.71 billion in February 2007.

Credit card loans applied saw a decline of 65.2% YoY to RM1.27 billion in April from RM3.65 billion in the same period last year. It then further decreased by 7.4% to RM1.18 billion in May.

Loan growth is expected to surge in the second half of 2020 due to the reopening of the economy and stimulus measures announced in the short-term National Economic Recovery Plan or Penjana.

It was previously reported that banks are likely to register loans growth between 3% and 4% for 2020 as the central bank slashed its Overnight Policy Rate by 25 basis points to a record low of 1.75% earlier this month.