Mixed views on getting property developer loans

The introduction of an initiative that enables property developers to give out loans to buyers at an interest rate of between 12% and 18% has received lukewarm response from the property sector.

Analysts, in general, do not view this as a major catalyst to invigorate the slowdown in the sector.

The Bursa Malaysia Property Index nudged up 2.26 points to 1,208.95 yesterday, with 31 counters up, 20 down and the remaining 44 unchanged at the end of trading.

Among the big players, Mah Sing Group Bhd was unchanged at RM1.60, SP Setia Bhd was up four sen or 1.18% to RM3.43, IJM Corp Bhd climbed five sen or 1.47% to RM3.35, Eco World Development Group Bhd was unchanged at RM1.34, while Gamuda Bhd slid two sen or 0.41% to RM4.83.

According to AllianceDBS analyst Quah He Wei, the impact on the sector could be minimal and it might not be a catalyst to upgrade the sector.

“This is because of the higher interest rates to be offered by the eligible developers. I am not sure which developer will be interested to apply or carry out this new initiative,” he told StarBiz yesterday.

AffinHwang Capital banking analyst Loh Jia Ying believed the move would not cause a dent to the banking mortgage business.

“This is because the initiative is aimed at helping those who have difficulties getting a housing loan from banks.

“Additionally, the difference in the interest rates between the developers and the banks is quite large. Normally, banks’ interest rates range between 4.5% and 5% as opposed to 12% and 18% loans from developers,” he said.

Yesterday, the Urban Wellbeing, Housing and Local Government Ministry had announced the introduction of an initiative that enabled property developers to give out loans to buyers.

Minister Tan Sri Noh Omar was reported as saying that the move was intended to assist Malaysians who were unable to get a full housing loan from banks, or those who may only be given a partial loan.

“In order to alleviate the burden to the buyers, who sometimes find it hard to get bank loans, the ministry has agreed to give money-lending licences to developers who are interested, especially the established players.

“Sometimes, the buyers don’t get 100% loans, so the developer can give them a loan to make up for the balance,” said Noh.

A news report in July quoting the Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia said that the Malaysian residential property sector was expected to remain flat going into next year, weighed down by uncertainties in the global economy.

This cooling period of the property sector could stem from the race to develop high-end property, especially in urban areas in the last decade.

Since 2008, the value of the property transacted priced from RM500,000 and above has doubled from 31.74% to 57.16% in 2014.

Between 2008 and 2014, property prices went on an uptrend, which resulted in a higher transacted value.

The Government’s push for reality had resulted in developers giving a re-look at strategies in terms of product concept and pricing.

The demand for affordable housing had risen, while sales of property priced over RM500,000 had declined this year. - The Star

1 comment

September 12, 2016 at 11:43 AMVON

There was massive hike that drove property prices due to RPGT removal and cheap credit and creative arrangements like DIBs to where we are today. Property prices are way unaffordable for typical malaysians.
Now this great idea to put more malaysians into higher debt at higher costs. Bubble getting bigger by the day. Bravo