NEW STRAITS TIMES. 15TH MAY: The recent hike in the overnight policy rate (OPR) by 25 basis points (bps) to 3.0 per cent would not negatively impact the local real estate market, acording to real estate specialists.
They predict that the housing market will continue to be strong, with moderate price increases and rising demand as more individuals turn to real estate as an inflation hedge.
“Even if Bank Negara Malaysia (BNM) raises the OPR by another 25 bps to 3.25 per cent this year, we think the market will continue to grow, especially among first-time homebuyers and investors. At 3 per cent, the OPR is negligible…but having said that, we hope it does not increase further this year,” said one of the major real estate developers in the country.
“As a developer with numerous active projects, we must be innovative. Despite all the obstacles, we must give homebuyers greater incentives to encourage them to purchase a home as it is an investment,” he told NST Property.
On May 3, BNM increased the OPR by 25 bps to 3 per cent because it continued to believe that robust domestic demand was still the main driver of the world economy.
In response to widespread misperception, the central bank defended its recent decision to raise the OPR to 3 per cent by saying that it didn’t want to maintain the rate too low when economic growth was robust.
At the briefing on the first quarter of 2023 on May 12, BNM Governor Tan Sri Nor Shamsiah Mohd Yunus said that the central bank intended to prevent situations in which rates were raised either too much or too little and unnecessarily weakened the economy.
“I must also correct the perception that we want growth to be slower. That is certainly not true. If our inflation level heats up, all our purchasing power will be impacted regardless of whether you have a loan or not,” the governor said.
According to her, persistently low interest rates that are out of step with the state of the economy could have negative consequences like excessive borrowing and spending.
“This could push up prices even more. When that happens, all of us will be affected, especially the poor and vulnerable,” Nor Shamsiah said.
She said it may also encourage excessive risk-taking, speculative investments in an effort to obtain better returns, and an increase in the likelihood of financial frauds.
Juwai IQI co-founder and group chief executive officer Kashif Ansari said that housing market indicators have been positive over the past three quarters with rising transaction volume and declining overhang.
“We are confident this positive trend will continue in the second quarter. Although the higher rates make purchasing and developing housing more expensive, we believe the real estate market can absorb this increase,” he said.
The Real Estate and Housing Developers’ Association (Rehda) Malaysia president Datuk NK Tong expects a tailwind amidst the inflationary environment particularly after the property sector is opening up after three years of pandemic.
“However, I think people recognise real estate is a good way to hedge against inflation. So I think investing in property is still positive,” he said.
Tong said the finding of a survey that was unveiled in February for the end of 2022 showed that most of the local property developers are more optimistic about the second half of 2023.