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Property buyers will
most likely be undeterred by last week’s rate hike as analysts view the
rise in overnight policy rate (OPR) signals the firming up of property
prices. Bank Negara Malaysia (BNM) raised its
OPR by 25 basis points
(bps) to 2.75% last 09/07/2010, Friday after its first rise
on last March's
Monetary Policy Committee (MPC) meetings.
The central bank said the hike was prompted by the continued global
recovery in the second quarter, supported by robust and broad-based
growth in most emerging economies, in particular Asia , and a moderate
recovery in the advanced economies. The rate hike will be followed by a rise in
bank's base lending rates. This would only have a marginal impact on
demand sentiment in residential properties. This is because the recent
improvement in property sales has been primarily supported by the
attractive financing schemes offered by most major developers which,
most importantly, included interest-absorption-schemes whereby
developers bore all financing costs on behalf of buyers up to vacant
possession.
It noted that as some developers offered an additional two years’ zero
interest after vacant possession, which implied that buyers who bought
such properties would not be deterred by interest rate volatility for
the next two to five years, if all else remained unchanged. However,
developers that offered such schemes would be marginally affected.
Developers who offered such schemes would have to absorb any increase in
financing cost on behalf of the buyers for the next two to five years,
and will therefore have their earnings margin marginally affected during
the period.
We believe that the
interest commencing 2009 in mid- to high-end landed properties could
possibly be a prelude to the next main theme in the upcoming long-term
up cycle early next decade, which could last three to five years,
similar to what the years of 2004/05 were for the 2007/08 major up cycle
for high-end condos. It added this was due to the fallout in high-end
condos in 2007/08 and expectation that the outlook for the sub-segment
would be less sanguine going forward have forced the excess capital
among avid real estate investors to take refuge in higher-end landed
properties, which was the only real estate asset class yet to experience
any bubble since the 1997/98 Asian financial crisis.
Additionally, the
entry of buyers looking to upgrade their properties to mid- to high-end
landed properties appeared to have picked up steam, thus bolstering the
performance of this sub-segment of late.
Source:
Malaysia Real Estate Agent Website |
