NEW STRAITS TIMES. 8TH MAY: Bank Negara Malaysia’s decision to raise the Overnight Policy Rate by 25 basis points (bps) to 3 per cent will have an impact on homebuyers, developers, and property prices, said Kashif Ansari, co-founder and group CEO of Juwai IQI.
The effects on the ordinary homebuyer would vary depending on their circumstances, according to him.
He said the OPR hike of 25 bps might result in a 0.25 per cent increase in the interest rate on a typical mortgage.
“For a homeowner with an RM500,000 mortgage at 3.5 per cent and a remaining term of 20 years, a 0.25 per cent increase in interest rates would lead to monthly mortgage payments climbing by about RM124 per month,” he said.
Higher rates, according to Kashif, will heighten the hurdles that projects must clear before beginning development.
“We could see a moderating in the number of projects that are planned or start construction over the next six months. In 2022, construction started on 98,000 landed and high-rise residential units and, by the end of the year, just over 89,000 units were in the pipeline for future construction,” he said.
On the impact on housing prices, Kashif said that higher rates make purchasing and developing housing more expensive.
“But we believe the real estate market can absorb this increase. For buyers, the higher expense of servicing a mortgage is offset by many families’ better household financial circumstances,” he said.
Kashif said the need to raise rates again reveals the fundamental strength of the Malaysian economy in 2023.
Bank Negara expects further economic expansion due to domestic demand, higher employment, a pickup in tourist arrivals, and spending on multi-year infrastructure projects.
“It’s much better to have a strong economy and need to raise rates to keep it from overheating than to have a sputtering economy that needs policy stimulus. Today’s new rate is still 25 bps lower than the 3 per cent OPR rate we had in 2019,” he said.
Kashif thinks that the central bank is determined to rein in inflation and bring the economy to a soft landing where growth and inflation are balanced.
“Growth prospects are resilient, even with this latest rate rise, and growth will support the housing market. We believe the housing market will remain robust, prices will moderately increase, and demand will continue to grow.
“All the housing market indicators have been positive over the past three quarters. Transaction volume is up, the House Price Index is up, and the overhang is down. We are confident this positive trend will continue in the second quarter,” Kashif said.