GST, OPR link to property sales
The anticipated goods and services tax (GST) and the hike in the overnight policy rate (OPR) will impact housing affordability and sales, according to Maybank IB Research.
It said the benchmark OPR of 3% was expected to rise 50 bps (basis points) to 3.5% following the central bank’s monetary policy committee meeting in early July.
The report said a 50bps increase in the mortgage rate could lead to a 6.8% jump in monthly instalments based on a base lending rate (BLR) minus 2.4% for a 35-year loan.
“This would impact affordability and investment decisions for new purchases,” it said.
The report also said the housing affordability index has been trending down since 2009 due to hikes in the BLR to 6.6%. The BLR was set at 5.6% between 2009 and 2011. Other reasons for the index to trend downwards include the spike in property prices without a significant rise in income.
The report said that with most developers already doing GST-related repricing and recosting exercises ahead of the April 2015 timeline and the anticipated higher interest rates, the housing affordability index could decline further. This would lead to a decline in property sales.
“While developers will be able to pass on the upcoming GST to buyers of non-residential properties, they may have to absorb some of the GST impact for residential properties that were sold during/before 2013 and which remain uncompleted on April 2015.
“We believe a majority of the sales secured in the last one year have not taken into account the implementation of GST,” the analyst said.
Margins are also likely to compress in the coming period due to the offering of more noncash incentives to attract property buyers.
On top of that, the report said higher labour costs and higher transportation costs after last September’s fuel price hike were expected to eat into margins.
Malaysia’s high household debt amounted to RM854bil last year, accounting for 86.8% of nominal gross domestic product (GDP).
Maybank IB said investors felt Eco World Development might be the new leader for the property sector given the support by former S P Setia staff and its expansive land bank worth RM43bil in gross developmental value.
Meanwhile, Batu Kawan in Penang was introduced as a new property hotspot in Malaysia. It stands to benefit from the new second Penang bridge and better control on land supply from the state government.
“It is unlike Iskandar Malaysia, which relies on the bilateral relations between Malaysia and Singapore,” the research house said.
Maybank IB observed that the share price of land owners Tambun Indah, Malton and Global Oriental rose 14%, 19% and 24%, respectively, benefiting from interest in Batu Kawan.
Source: StarProperty.my
The era of high interest rate is coming…
From CIMB SG property sector report:
Healthy correction
Prices and volume continued to decline in 1Q14. The supply concern is
starting to show as physical completions exceed demand, resulting in a
higher vacancy rate and weaker rental market. We continue to expect
a 10-15% correction in property prices but believe that this will be
healthy in the long run. We reiterate that leverage is not the main
concern in this cycle, for both households and developers. We remain
Neutral on the sector, with bottom-up picks in developers with less
residential exposure
*In SG
Wah luckily I just fully paid off 2 mortgages last month. Good timing then, see who wants to throw, can pick up another few.
Increase BLR? Goodbye flipper
Increase BLR? Goodbye flipper…. T_T
Waiting for island landed property to drop. My dream to own landed property in island is alive.
Waiting for island landed property to drop. My dream to own landed property in island is alive.
@richdaddy
That is SG, this is www dot penangpropertytalk dot com
Island landed to drop? Possible but landed still have one base line and price banyak keras.
Haha……waiting to drop? Let see it.
Hi batman, what is your budget for the landed? I know of someone who might be willing to let go of something at a discount.
Already drop some. Check out Setia Greens. Make sure ask for 20% discount as vacancy rate is high for this location. Neighboring landed can get cheaper if you don’t mind and foreign maids next door..
so fast got offer already ah. My budget 750k (nett), if want nego talk again next year.
No old terrace houses or single storey please.
@Chocolate
Agree, landed property in price is steady, even it is in bad situation, personally, I don’t think that it will decline a lot, I am still confident in landed property but condo.
@batman
I think can easily get Setia Greens 3-storey terrace with your budget. Happy investing!!!
750K landed freehold in Island?
I offer to buy 770K.
LOL
Hi batman,
Let me interpret this : “No old terrace houses or single storey please” –> New with at least double storey terrace at RM750k nett. Right?
I think the property that my friend was thinking of letting go doesn’t fit this description.
His is triple-storey terrace but the price is above your budget even with a 20% discount to the current market asking price.
But my personal advice to you is, you should be careful with what you’re looking for. With such budget and requirements and if you insist on island, you could end up with something terrible.
In other words, if you’re on a budget, you shouldn’t consume expired bird’s nest because you will end up with diarrhea. You should instead consume egg white, which is equally rich in protein if not better.
Please seriously consider Batu Kawan.
@robin
batman can wait. I’m not sure if your friend can. LOL.
Funny, many interested with Setia Green but yet want to buy ridiculously cheap. Except for the house internal design, its guarded environment and lake indeed very nice.
Another joking point, I guessed “old terrace” is a concern to individual not general market. True some are old and rundown, some are well renovated and maintain….you need to filter.
New also can buy 1, u go check the Batu Uban, or Jerejak NEW TERRACE price…compare to so called old terrace.
Some people forget about the primary fundamental of property is “LOCATION, LOCATION, LOCATION”, isn’t it?
But here I see the discussion mainly on Price, making it looks like a commodity or stocks.
@wf
eeehhh…..so your point is……???
location mar island lor. who don’t know about location.
those details stuff like near cemetary, a lot foreigner ah, poor condition of house, no need to say what. understood.
Don’t talk about price, then talk about heart ah? The main point here is house price go down.
Actually, u brought out the point already, house has become trading commodity.
With interest rising, house price rising due to GST, it is quite impossible to own a house even a condo in penang island. Is it possible for the condo price to remain the same? or with slight increase?
With interest rising, GST and stuff, the demand will be lower because household have less money to spend. So demand lower, house price will be lower.
So it is impossible for the condo price to remain or increase. The condo got only 1 way to go that is to go down.
@batman
I didn’t say don’t talk about price, must it need to be make sense to the property mentioned.
Freehold Landed properties even though old terrace, in the right location (not like foreigners) should not go wrong.
The supply of new landed house is too little. Existing so called “old” supply also highly demanded if in good location.
There is one new project near Sg Nibong mesjid 3ST land is very small also sell like hot cake.
@batman
PV could be the first project to meet your budget. It’s now 850k. Another 100k drop to go. Stay tuned bro.
wow! this is a good news to me! hopefully this is the trend in future… else, really can afford to rent room (maybe rent room also will be taxed next time).
@phs
Residential rental does not have GST.
Also many vacant unit. So rental is dropping also. You can rent one cheaply now. Owner basically beg people to rent their house.
@checkout is that really possible? i mean everyone is worrying the price of property will increase after GST but seems like it is not. and yeah, a lot of vacant units as i know.
another move to curb property speculation. Plz continue to build more houses
KUALA LUMPUR: Malaysia’s economy grew faster than expected at 6.2% in the first quarter ended March 31, 2014, driven by robust domestic demand and strong recovery in net exports.
A consensus estimate based on a Bloomberg poll of 22 economists had expected the country’s gross domestic product (GDP) to expand 5.7% for the first quarter, compared with a growth of 5.1% in the last three months of 2013.
“All sectors in the economy except mining registered strong growth,” Bank Negara governor Tan Sri Dr Zeti Akhtar Aziz said.
In the first quarter, the services sector grew 6.6%, while the manufacturing sector, supported by strong performance in export oriented industries, grew 6.8%.
The agriculture sector grew 2.3%, while construction sector grew 18.9%, driven by the residential sub-sector. The mining sector shrank 0.8% due to lower crude oil output.
Malaysian Inflation Rate Unchanged in March
Malaysian annual inflation remained steady at 3.5 percent in March of 2014, after accelerating in the previous six months. A slowdown in transport prices was enough to offset higher food, housing and gas prices.
The year-on-year inflation for food and non-alcoholic beverages accelerated to 3.9 percent in March, from 3.8 percent in the previous month, while cost of housing, water, electricity, gas and other fuels rose to 3.6 percent up from 3.5 percent. In contrast, transport cost slowed to 5.1 percent from 5.5 percent.
Additional upward pressures came from recreation services and culture (+1.6 percent), furnishings and household equipment (+1.1 percent), restaurants and hotels (+4.5 percent), education (+2.3 percent) and health (+2.3 percent). On the other hand, prices fell for communication (-0.5 percent), clothing and footwear (-0.1 percent).
On a monthly basis, the inflation rate increased 0.1 percent in March, down from 0.3 percent recorded in the previous month. Lower costs were recorded for housing, water, electricity, gas and other fuels (0.1 percent compared with 0.7 percent in February), miscellaneous goods and services (0.4 percent from 0.6 percent), recreation services and culture (0 percent from 0.1 percent), furnishings and household equipment (0 percent from 0.2 percent), clothing and footwear (0 percent from 0.1 percent), restaurants and hotels (0.4 percent from 0.6 percent), and education (0.1 percent from 0.5 percent).
Property price in island wont drop as it don’t depend exactly on supply and demand rule.
Many people in Penang use it as an investment tools.
Though the market now is experiencing slower down, transaction lesser, but price still maintain.
You can compare those project early phase and later phase the price differences.
For those who dreams property price will drop dramatically at the end will be the most disappointed one.
@Ranee
Won’t drop? It’s already dropping in subsale market. You are dreaming. Go out and find out more through agent.
@Mau beli
Maybe what Ranee meant was you won’t see 50% kind of drop, maybe 20%.
it depends on location and type of properties.
not all location in Island is hot…..some already over “fried”.
Just like many of u i m hoping for landed to drop but reality tell me the drop wont be in landed….no neeed to guess which type properties to drop 1st. it is common sense.
Landed still very strong leh, have been following the prices for a year already. Landed in sg ara or even balik pulau not dropping at all.
For Batu maung, only Prestige V drop but that one due to foreigner issue.
Testing, not sure why the ID logo weird weird.
@wf
Prices in Sg.Ara landed has already corrected 10-15% for the latest 2 transactions in Apr, compared to previous transactions. Although not expected to correct more than 25% in Sg.Ara, the launches in Batu Kawan by end of the year will put forward noticeable uncertainties in the climate. Hopefully the impact won’t be too much. But once the psychology reflection point is triggered, the centre of gravity could swing significantly towards BK. Hopefully things don’t fall into that region, results could be unimaginable.
To those who looking for new landed property, you may want to consider mainland before it becomes unaffordable. New landed property in mainland hovering at close to 600k now. You already miss the boat once, don’t make it twice. And advice you to stop hoping for the boat to come back.
Sg Ara is not small area and there are so many housing area. Stretch from Setia Green till One Residence.
I am not sure if you refer to non GnG area for price drop? Taimima or Zan Villa?
I don’t see drop and in fact increase in area like SPI and One Residence.
@Mau beli
My focal point and interest mainly on new project rather on sub sale.
But I would like to quote 2 recently launched projects in Relau.
Ideal One Imperial and recently phase 2 Imperial residence, price increased from 380+ psf to 460+psf.
Sierra East by Chong company, blk A and recent launched blk B, price from 430+ psf to 480+psf.
Go out and find out more from both developer offices to verify.
Be realistic , Price will never drop to 2007 value.
Labour ,material,$ currency and inflation won’t gone away with economy crisis.
It just return to the more realistic value. I presume the pricing at 2012.
Probably of 10%-15% lower value. This has no impact to investor.
So does any buyer. It make no difference for their installment.
Example installment(roughly)::
900K == 4.0K installment
775K == 3.5K installment
If you cannot afford installment 4K NOW, I don’t see why you can afford 3.5K in future.
So, for a 500K property, the differences of 15% pricing value for installment will be even negligible.
If no one buying, 750k house will drop to 500k. But this will depend on location. Most people will be holding negative equity.
@james
Haha…based on that argument of “If you cannot afford installment 4K NOW, I don’t see why you can afford 3.5K in future”, you’re in fact saying price would come down further until someone can afford to buy, or of course, you can hold it for your children.
Meanwhile, Batu Kawan in Penang was introduced as a new property hotspot in Malaysia. It stands to benefit from the new second Penang bridge and better control on land supply from the state government.
“It is unlike Iskandar Malaysia, which relies on the bilateral relations between Malaysia and Singapore,” the research house said.
Batu Kawan the new hotspot in Malaysia???
@delime
Well, it depends on what your definition is for “hot”. Hot for home occupiers? Hot for speculators?
It would be a job well done for state gov if it ends up a hot spot for home occupiers providing high quality affordable homes with good access to work places. It would be a big screw up for state gov if it ends up a hot spot for speculators.
You mean you waiting for some caves price to drop?
what about vehicle prices coming down, so that the Bat mobile is more affordable 
@batman
It is too early to say high BLR era. BNM has been very cautious in increasing OPR. Talk since last year. In July maybe slight increase to tackle financial imbalance.
Second half of the year is critical. Effect of subsidy removal can be fully seen. March inflation unchange is a good news. High loan rejection rate is also a good news. With GST next year, consumer will become more cautious in spending. Demand across all sector will soften. Inflation will tend to stabilize. Therefore, high BLR is unlikely.
To me, less and less subsale now is a good sign for sustainable property. Genuine buyer can take advantage in subsale market (those who no longer able to hold) with 10-20% correction. New property demand to soften in these 2/3 years until subsale market is cleared. Tighter loan application is good to soften the new property demand. Else developer keep on increasing the price.
After 3 years, when everything stabilized, bull run will resumes.
@Jason
In your opinion, how sure they will increase the loan interest?
@IsaacTan
My feeling for July is 55% chance for slight increase, 45% chance to remain and 0% chance to drop.
My prediction is right.