Actual sale of residential properties declining

August 24th, 2012 Leave a comment

PETALING JAYA: The residential property market may be cooling down in terms of actual sales due to credit-tightening measures by banks, according to real estate consultants and Bank Negara data.

Bank Negara’s website showed loan approvals’ percentage for residential properties in the country declined to 46.8% in the first half of this year from 50.1% during the same period in 2011.

The number of loans applied for purchases of residential properties increased by 2.9% year-on-year in the first half of this year to RM96.7bil.

However, the number of residential property loans approved during the six-month period declined to RM45.26bil from RM47bil in the same period in 2011.

It is also worth noting that the loan approval percentage for non-residential properties was stable at 52.3% in the first half of this year, compared with 52.4% during the same period in 2011.

The number of loans applied (RM50.35bil) and approved (RM26.35bil) for purchases of non-residential properties was also stable in the first half of this year.

CB Richard Ellis (Malaysia) Sdn Bhd executive director Paul Khong said if the housing loan approval rate continued to decline, it will affect residential property prices.

“In order to conclude transactions, residential property sellers may now need to realistically adjust their selling prices as many of the buyers cannot get their loan applications approved,” he said.

KGV International Property Consultants director Anthony Chua said although the demand for residential properties continued to be high, the credit-tightening measures by banks had resulted in the market “cooling somewhat”.

“We are still monitoring the situation. There is less transactional activity in the market this year for both new property launches and the secondary market compared with last year,” said Chua.

Property consultancy CB Richard Ellis (M) Sdn Bhd had, in its recent report on the Kuala Lumpur residential market for the second quarter of 2012, also noted that there was a significant decline in the loan approval percentage this year.

“The loan approval rate was as high as 60.5% during the first five months of 2008, and has declined steadily since,” said the report.

The CBRE report said that the lower rate of loan approvals this year could be attributed to the implementation of new lending guidelines by Bank Negara.

Effective this year, banks have started using net income instead of gross income to calculate the debt service ratio for loans.

“Anecdotal evidence from real estate agents suggests that transactional activity has also declined as a result.”

The property consultancy also pointed out that despite the lower loan approval rates, buyer interest in new property launches, typically of smaller housing units in secondary locations, during the second quarter remained strong with developers continuing to offer attractive incentives to the purchasers such as the developer interest bearing scheme (DIBS), early bird discounts, free built-in cabinets and free legal fees.

“We expect 2012 to be a period of stabilisation especially within the luxury residential market, with transactional activity depressed by uncertain economic conditions and the reduction in loan approval percentage, which remains well below 50%.”

The CBRE report also said speculative property purchases were expected to be reduced for the rest of this year, as a result of tighter lending conditions, uncertain economic outlook, and concerns about the outcome of the upcoming general election.

Meanwhile, another property consultant said the tighter lending conditions had taken a visible toll on the secondary residential property market.

“Newly-launched properties are selling well thanks to better financing access, especially with the DIBS offered by many property developers.”

The consultant said slower sales activities in the secondary residential property market had resulted in innovative offers from marketing agents.

“This includes transactions where buyers sign the sales and purchase agreement but take the bank loans only a year or twolater. In effect, the buyers lock in the unit price now (perhaps in anticipation of further increases in market prices) and defer payment until much later. This works just like an informal DIBS,” he said.

In a recent report, Kenanga Research also said based on its channel checks, the secondary market appeared to be very weak and prices of secondary and primary products have diverged further.

The research unit opined that buyers were more focussed on new launches due to financing and promotional schemes.

“From a bank’s perspective, we think there is a preference to lend to the primary market as it means better asset quality whilst banks can get all-in’ deals with developers (for example, end-financing to bridging to land financing) to ensure a more balanced systems loans growth.”

Kenanga Research also opined that as a result, property developers can continue to grab greater market share and chalk-up high sales, although it expected Malaysia’s overall residential transaction value growth to be relatively unexciting at 5% year-on-year.

It was noted that despite the tighter lending criteria, Malaysia’s total residential transaction values have remained stable in the first quarter of this year.

It said buying interest remained strong, due to residential property buyers hedging against inflation and the lack of alternative investments, but this will be reigned in by more prudent lending criteria and the banking system’s fear of real-estate tightening measures such as higher real property gains tax.

Source: The Star

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  1. In laws
    August 24th, 2012 at 14:40 | #1

    oh oh… KL property sales is cooling down. Thanks to the lending guidelines by BNM. Don’t know whether price will drop 40% or not, like forecasted by some here for Penang property.

  2. WTF
    August 24th, 2012 at 17:45 | #2

    heehee :
    wow..overwhelming responses. Everybody seems so exited..hee hee
    My words (and also all your words) may not be convincing, let see what the expert said in the official research paper by Penang Institute on Supply & Demand in Penang Housing Market. Good & detailed study but pretty long. Allow me to summarize:
    1. Housing supply is OVERSUPPLY by 21% compare to population. Every district in Island & mainland is OVERSUPPLY.
    2. Housing price growth exponentially (Condo price +~80% in island) in 5 years, while middle income profession salary growth is stagnant last 5 years, facing increasing cost of living and thus reducing affordability.
    Conclusions: A significant mismatch between supply & demand leads to an unsustainable housing market, Penang need to understand internal housing market in greater details, so that future policies and development approvals are evidence based and reflect the full range of demand factors.
    Some interesting remarks:
    – The median house price to median income ratio at Penang island has rise from 6.6 to 8.1 in 5 years. The US housing affordability index rose from 3 to 5.8 in six years from 2000 to 2006 resulting in a housing boom and bust and triggering the greatest financial crisis since the Great Depression of 1929.
    – The prices of prime properties in Dubai for example have fallen by 50% or more since the debt crisis of 2009 where there was a significant oversupply, and so caution should be taken.
    A really good reading with detailed fact-based analysis. If you want to condemn or discredit the research, please make sure you got fact/data to support. You know lah now we got the evident act 114A. Hee hee hee hee hee……enjoy the reading!

    I found this information is matched..

  3. heehee
    August 26th, 2012 at 18:29 | #3

    I thought those hard-core supporter on properties boom will come & debate here.. No??
    Lose confidence after seeing this news???

  4. In laws
    August 26th, 2012 at 18:45 | #4


    Cham lor… you wish comes true already. hee hee hee…

  5. cindy85
    August 26th, 2012 at 18:47 | #5

    Why wasting time to debate?
    Time will tell the result.

  6. heehee
    August 26th, 2012 at 19:08 | #6

    Yes, the actual sales trend already telling you the result.. hee hee hee

  7. jackie
    August 26th, 2012 at 19:18 | #7

    cooling down but if say drop 40-50% from the original price?
    Hmm..time will tell but i am not optimistic on there esp 2nd link is on the card, every project is almost fully booked, catching up the price with KL or even higher than(significantly considered low price compare to oversea like Sg, Aussie, and etc)
    I would say….it’s getting lower but if the price is stagnant, it’s only happens temporary, which means stagnant but will rise back…
    450-500 per sq feet is OK price for every foreigners from HK, Taiwan, SG….1Mil to have a sea view and all the facilities….South Bay is a very good example!

  8. WTH
    August 26th, 2012 at 23:16 | #8

    heehee :
    I thought those hard-core supporter on properties boom will come & debate here.. No??
    Lose confidence after seeing this news???

    This guy never read the article properly, have you get to understand the summary of above article? Made me laugh instead of smile hee hee hee…… now

  9. heehee
    August 27th, 2012 at 08:37 | #9

    Yes, high end properties still got foreigner buyers.
    Typical residential I also don’t think drop 40-50%, unless significant economy downturn & retrenchment….taking N-Park as example, it price although “underwater” for > 10 years (I think < 30% lower than launch) since completed in year 1998…but the recent 3 years rise 100% following the big trend…so if you can hold long long, definitely price will be rise…hee hee hee..

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