Access to financing, income growth, foreign demand will up housing sales
The outlook for the Malaysian property market is promising, with sales volume expected to increase by 5 to 10 per cent this year, according to RAM Holdings Bhd.
In stating this, its chief economist Yeah Kim Leng said that the improving economic outlook and friendly lending policy will help to increase the confidence level of consumers and boost the property market.
‘Affordable housing and domestic-led growth strategy implies supportive policies will continue, though Bank Negara Malaysia remains wary of asset bubbles,’ Dr Yeah said at a talk organised by the International Real Estate Federation (FIABCI) here yesterday.
He added that the favourable demographics, stricter-but-still easy access to home financing, rural- urban migration, foreign demand and income growth are all expected to improve housing sales.
Dr Yeah said that expectation that the central bank will start ‘normalisation’ of its monetary measures beginning this month will not dampen home purchases, especially when economic growth strengthened further.
RAM expects an increase of 0.75 to 1.00 percentage point in the overnight policy rate by year-end.
Loan growth is projected to expand between 8 and 10 per cent this year with non-performing loans likely to hover around 2-3 per cent.
Loans growth remained positive at 6.5 per cent last year during the first 11 months of 2009 despite the economic recession as loans to the broad property sector outpaced overall loan growth.
Dr Yeah said that consumer credit will continue to remain the core focus of banks’ lending, but competition from non-financial institutions is likely to intensify.
Property loans accounted for 36.2 per cent of total banking system loans.
‘The banks still view residential property lending as relatively safe, accounting for 26-27 per cent of their loans portfolios,’ he said, adding that credit conditions are not expected to tighten as demand is not overly excessive and an output gap remains for the rest of the year.
On the Malaysian economy, Dr Yeah said that the country is expected to resume modest growth this year with an upside bias should public sector reform and transformation policies and strategies strengthen further consumer and investor confidence, thus triggering a surge in domestic and foreign direct investment.
‘After a massive running down of inventories last year, re-stocking will contribute to higher production this year but ‘autonomous’ or ’self- sustaining’ growth has to come from private consumption and investment,’ he said.
RAM projects the country’s economy to grow by 4.9 per cent in 2010 and 5.4 per cent in 2011, supported by domestic-driven private sector spending and government spending.
Dr Yeah said that Malaysia could reduce its budget deficit to below 3.0 per cent of the gross domestic product (GDP) from 2013 onwards, compared with the forecast of 5.6 per cent this year.
According to him, there is a chance for the deficit to be reduced from next year if economic growth can improve further.
‘With the goods and services tax (GST) introduction next year, the country can raise more revenue and will be able to cut back on spending,’ he said.
Currently, taxes and royalties from oil and gas account for 40 per cent of the government revenue while its debt level makes up 40 per cent of the GDP.
Source: Business Times, 4 Mar 2010
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