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Property prices from RM500,001 to RM700,000 have highest loan rejection rate

Newly-launched property projects: Highest loan rejection rates based on selling prices of properties in the primary market. Newly-launched property projects: Highest loan rejection rates based on selling prices of properties in the primary market.

Properties priced from RM500,001 to RM700,000 are the most vulnerable to loan rejection, according to almost a third of 159 respondents to the Real Estate Housing Developers Association of Malaysia (REHDA) property industry survey 2H2015.

About 30% of respondents agreed that properties priced from RM500,001 to RM700,000 faced the highest rejection rates, while 28% of respondents said properties priced from RM250,001 to RM500,000 faced the highest rejection rates, whereas 16% of respondents said properties from RM700,001 to RM1 million were most likely to experience financing issues.

“Currently, the RM200,001 to RM500,000 priced residential houses are still the most launched in the market for six states in the second half of 2015 – Kedah, Kelantan, Pahang, Perak, Melaka and Terengganu.

Subsequently, the most launched houses priced in the RM500,001 to RM1 million segment for the second half of 2015 are for the states of Negeri Sembilan, Selangor, Penang, Johor and Wilayah Perseketuan,” said REHDA president Datuk Seri Fateh Iskandar Mohamed Mansor who presented the survey findings to the media this morning.

According to him, the high loan rejection rate will really impact aspiring homebuyers, especially those who are buying for the first time.

“We note that first-time homebuyers have increased from 36% in the first half of 2015 to 47% in the second half of 2015 while investors have decreased from 23% in the first half of 2015 to 13% in the second half of 2015. The survey also noted that 62% of buyers say they buy for their own stay, so most of the buyers are really purchasing for self-dwelling and not for speculation,” he noted.

There were also fewer new launches in 2H2015 compared with 1H2015.

The survey, which was held from July to December last year, was carried out by REHDA to assess the property market performance for 2H2015, the property market outlook for 1H2016 and the sentiment of developers on 2H2016.

He said there is no denying that there are speculators, but their numbers are very minimal.

“The figures are really insignificant and they do not impact the property market at all,” he said.

Datuk Seri Fateh Iskandar, said REHDA's survey found that loan rejection was the number one obstacle for developers in the second half of 2015, with more than 68% of respondents saying having more than 30% unsold units.

"Most of the unsold units were affordable houses, and that strict mortgage lending conditions were denying aspiring owners their first homes. The rejection rate for affordable housing loan applications was above 50%, and that strict lending rules were hurting the property market," he said.

But despite banks being cautious with lending, REHDA said the take-up rate for new homes was still relatively good. As an example, in the affordable segment, units sold increased in the second half of 2015.

Sales of apartments or condominiums, the preferred housing for most young families in the country's major cities, rose by 120% from 779 in the first half to 1,844 in the second.

For the same period, single storey terrace houses sales doubled from 300 to 616 while low cost or flats units sales rose close to 170 from 466 in the first half.

But he said the property market was still in a slowdown. In the second half of 2015, more than 46% of houses in the RM500,000 range, mainly in primary areas in Selangor and Johor, were unsold.

“Gone were the days where people were queueing up when there is a launch. Before 2014 when there is lauch properties would be sold out in just a week.

“Now it can take up to six months to reach the 60% target. So things are not the same as before,” the Rehda president said, adding that this is despite house prices stabilising.

Property prices have more or less remained the same in most states, with developers focusing more on affordable housing launches for 2015, and the trend looks set to continue this year.

Commenting on whether the high household debt is the reason for the rejection, he noted that approximately 30% of it comprise mortgages, 20% automobile loans and while the rest is made up of credit cards and personal loans.

“As compared to other countries such as Australia, their current household debt is standing at approximately 82%, with mortgages constituting almost 70%, so our country’s figure is little as compared to theirs,” he noted.

He cited that Malaysia’s household debt currently stands at 87.9% of gross domestic product (GDP) according to Bank Negara Malaysia’s latest figures.

According to the survey, 62% of the respondents agreed that the Developers Interest-Bearing Scheme (DIBS) should be reinstated for properties below RM500,000 for first-time homebuyers, with 65% of them expressing that DIBS will help to improve their sales performance.

“We are not asking for DIBS to be given to all homebuyers, but for those who genuinely want to own their own house for the first time. This will ensure that there is no speculation in property prices, yet the right people will benefit from them,” he said.

The REHDA president said most developers remain pessimistic about 2016’s outlook and expect sluggish growth in the property market throughout the year.

Despite rising costs of production, REHDA said property prices are expected to remain the same for 2016 as developers would likely absorb costs to boost sales.

Meanwhile, in another property forum entitled “Property Market 2016: What to Expect?” held today, the moderator of the forum, REHDA deputy president Datuk Soam Heng Choon noted that the slowdown in new launches could augur well for the future as it means that the property players are trying to balance up market supply and demand.

“The performance of the second half of 2016 is more or less dependent on the performance and sentiment level of the first half. We are hoping things will be better and cautiously optimistic about the industry’s performance this year,” Soam remarked.

 

News Source: The Malay Mail Online and The Edge Property, 9 March 2016

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