Slower growth in property sector

KUALA LUMPUR: The number of property units sold last year went up by 14.3%, an increase against 2010’s 11.3%.
However, the growth is expected to decelerate this year as Bank Negara Malaysia’s (BNM) measures on prudent lending take effect, curbing speculation in the domestic property market, according to investment analysts and property consultants.
According to figures released by the National Property Information Centre (Napic) yesterday, the volume of property sold grew to 430,403 units from 375,683 in 2010, while value rose 28.3% to RM137.83 billion from RM107.44 billion.
Sales were brisk in the residential subsector last year, chalking up the highest performance in five years. There were 269,789 transactions worth RM61.83 billion in the segment. Volume and transaction value registered a y-o-y growth of 18.9% and 22.1% respectively.
“This is not alarming. The healthy market activity shows that there are still sales and new units being picked up. Access to easy funding was a factor [last year], though with the new guidelines the market should see growth decelerating,” said a property consultant.
Some analysts said the delivery of new units launched since 2009 may add downward pressure on property prices. “But the quantum of the impact has yet to be seen considering this is the first property boom that the country has seen in many years,” said an analyst.

The overhang properties declined 15.2% to 19,607 units last year from 23,133. About 26.1% of them were condominium or apartment units.

There is also concern about the possible oversupply of office and retail space.
However, Napic expects this vacant space to be absorbed by foreign investors as a result of various developments under the Economic Transformation Programme.
Napic said commercial projects such as the RM25.07 billion KL International Financial District (KLIFD) will stimulate construction and benefit the property sector in the long run.
The residential subsector, which accounted for 62.7% of total market activity and 44.9% of the transaction value in the property market last year, is expected to maintain its leading role in 2012, according to Napic.
More than half of total transactions involved houses priced below RM150,000 for the residential segment. Units priced between RM250,000 and RM500,000 accounted for 16.4%.
“This could be attributed to the increase in the level of affordability and supported by the ease in borrowing, and attractive loan packages offered by the financial institutions,” said Napic.
The number of new launches rose to 49,290 units last year from 47,698 previously. Most of them were in Selangor, Johor and Perak, which collectively accounted for 51.2% of the new launches last year. The sector’s sales performance improved to 46.3% from 45.7% in 2010.
Overhang properties declined 15.2% to 19,607 units last year from 23,133 in 2010. About 26.1% of them were condominium or apartment units. Interestingly, properties priced below RM150,000 accounted for 55.7% of the unsold units.
Overhang properties are defined as unsold units after nine months of the launch.
Deputy Finance Minister Datuk Donald Lim Siang Chai said at Napic’s launch of the 2011 property market report yesterday that growth in the property market should stabilise after three to five years.
Lim said an annual growth rate of 10% to 15% is normal.
He said the government is concerned about the high residential property prices but they are still lower than in Asean countries such as Thailand and Singapore.
“At the moment, the issue is still under control and we will intervene if the figure shoots up too high,” said Lim.
He said BNM’s recent guidelines were implemented to prevent a bubble in the local property market.
“We wanted to ensure that only those who are qualified to borrow from the bank are allowed to do so. The level of consumer debt has been quite stable for the last couple of years and we hope this figure will not increase,” Lim said.
From January, the loan amount for mortgages is based on net personal income, instead of gross income as in the past.
In 2010, BNM put a cap on the maximum loan-to-value ratio for a third home loan at 70%, requiring a higher down payment. The government raised the rate of real property gains tax (RPGT) on properties sold within two years to 10% from 5% last year, a move to curb speculation in the property market.
According to BNM’s annual report, outstanding household debts rose at a slower rate of 12.5% last year compared with 13.7% in 2010. The level of household debt to GDP stood at 76.6% as at end-2011.
About 64% of household borrowings went towards the financing of residential properties and motor vehicles.
The full-year growth in borrowings for the purchase of residential properties remains at 12.7%. However, the number of borrowers with more than two outstanding housing loans grew at a lower rate of 2.9% last year from 14.9% in 2010.