Mortgage applications and approvals in Malaysia fell by 18 percent and 27 percent respectively in February compared to last year’s peak. This was attributed to stricter lending guidelines, heightened economic uncertainties and weaker consumer sentiment.
According to HwangDBS Vickers, mortgage approval rates dropped to 45 percent in February from 55 percent in August 2011, while the margin of financing dropped to between 70 and 80 percent, from 90 to 95 percent during the peak of the property boom.
The research firm estimated that the lower margin of loans would cost a borrower an additional RM360 (S$147) per month, or around nine percent of the average household income for a 30-year loan worth RM500,000 (S$204,030).
Meanwhile HwangDBS said mortgage rates remain competitive, with the Base Lending Rate (BLR) hitting between 2.4 and 4.2 percent. In addition, many property developers will look to offer discounts, gifts and interest-free schemes to ease the 70 percent loan-to-value (LTV) restriction for third mortgages onwards.
Despite the lower demand, it noted that property may not become more affordable due to unpredictable prices and tougher financing.
It added that companies which have REIT potential like KLCC Property and IGB as well as those that cater to the mass market segment such as SP Setia would likely perform better under current market conditions.
“At this part of the cycle, developers with exposure to mass housing will likely do better (more genuine demand from first-second homeowners who are less affected by bank tightening),” it noted.
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