Increasing the floor price of residential property for foreign buyers from RM500,000 to RM1mil will be a positive development for the housing market, according to analysts and consultants.
Many quarters are in favour of the move to raise the floor price as it would protect the housing market for the masses.
They say the move is timely due to the continued uptrend in home prices which are forcing financiers to start providing “second-generation” type of home loans which extend the servicing of the debt to the purchasers' children.
Property consultancy Knight Frank's executive director Sarkunan Subramaniam says the increase in floor price for foreigners would be positive as it would benefit the local buyers as the foreigners have been pushing up house prices.
“I think overall, this is a proactive policy measure by the Government to reduce competition for houses valued at below RM1mil. However, there could be some slight impact on foreign purchasers in Johor who choose to stay in Johor Baru but work in Singapore,” Sarkunan tells StarBizWeek.
Hong Leong Research's property analyst Sean Lim says that the move is “positive for the domestic buyers who have been frustrated by the rise property prices over the last two to three years”.
Lim says in a report that the impact on the overall property market will be minimal as “less than 5% of all transactions is by foreign buyers”.
Lim also states that the RM1mil floor price could be irrelevant as most foreign buyers are buying in the KL City Centre area and the Golden Triangle in Kuala Lumpur with valuations in excess of RM1,200 per sq ft.
“In the greater Klang Valley area, channel checks indicate that majority of foreigners are renting instead of buying houses,” Lim says.
Lim maintains his overweight rating on the property sector.
DTZ Debenham Tie Lung executive director Brian Koh says that the latest measure that is being considered by the Government will help protect the mass segment of residential properties from foreign speculation.
“A limit on foreigners which allow them to buy only houses that are priced above RM1mil would protect the mass market segment of residential properties and see less competition,” Koh says.
“There may be some impact on the foreign buyers of houses that are priced RM800,000 and above.
“But most foreigners normally buy properties above RM1mil so there will be limited impact on the property sector. These foreigners are from Hong Kong and Singapore,” Koh says.
CB Richard Ellis Malaysia's managing director Allan Soo says that the measure will have limited impact on the property sector as most foreign buyers are already buying properties that are priced above RM1mil.
CIMB Research says in a research note that it is “not entirely surprised by the proposed ruling as house prices have appreciated considerably over the past few years and it is becoming increasingly difficult to find residential properties priced below RM500,000 in Kuala Lumpur or Penang”.
“We believe the impact on developers with significant foreign buyers such as Eastern & Oriental Bhd would be minimal. Only 2.4% of residential properties transacted in 2011 were priced above RM1mil and foreigners typically chose higher-end properties,” it adds.
Should this higher floor price be approved, it would also mean protection for the mass market segment of property purchasers.
The Government intervention into the property market with the objective of eventually cooling down house prices to more realistic levels is also in line with the current trend by governments in Singapore, Indonesia and China.
Analysts say that the move shows how much property prices have spiralled locally and that the move is proactive amid growing fears of a property bubble.
An economist with RHB Research Institute says that sustained high property prices and news about financiers starting to offer second generation loans show the seriousness of the non-affordability issue.
“These financiers need to stretch the loans to the second generation which only indicate that houses are becoming unaffordable for a normal salaried person,” RHB Research said.
“From an economic point of view, if affordability issue continues to deteriorate it would not be a good feeling for the people. Moreover, these second generation loans may have legal implications as the financiers don't know the credit rating of the children of the current buyers,” the RHB spokesperson added.
A senior analyst with a foreign research house observes that property prices have sky-rocketed and reckons that the current prices are unrealistic.
“I think the Government should implement the measure immediately.
“There is no doubt that looking back, prices were more realistic in the past without people having to extend the loans to their children.
“The trend is for developers to offer small-sized units nowadays as the prices keep going up. The houses are becoming smaller and smaller because of the rising cost factor,” he adds.
According to statistics of the Valuation and Property Services Department, the number transactions for properties priced up to RM150,000 decreased year-on-year by an cumulative average of 30.6%. - By Daniel Khoo (The Star)