Cooling measures stem speculative buying

The slowdown in property market can be a good thing since it can prevent a crisis that is driven by speculative buying.

Notably, the government rolled-out various cooling measures since 2009 which slowed property transactions.

In a report, PublicInvest Research analyst Tan Siang Hing noted that the measures moderated residential property growth from over 30 percent to around 20 percent.

The Malaysia House Price Index (HPI) also moderated, after rising by seven percent in 2014.

“We believe it should, given the cooling measures,” said Tan.

“KL, Selangor and Penang saw the rise in house prices moderating to five percent, six percent and eight percent on-year. Surprisingly, Johor’s house prices rose above the average price growth after registering a 11 percent growth. Ultimately, the “smooth” decline in demand will be good for the sector in the long term to ensure a steady and sound growth.”

Aside from that, the banks’ tighter lending rules also restricted demand, resulting to fewer loan applications.

“The cooling measures have successfully stemmed unhealthy speculative buying and introduced more discipline in lending,” said Tan.

On top of that, the post-goods and services tax (GST) hangover on consumer demand will also flatten property sales guided by property developers.

The report indicated that downtrend in Q4 2014 after transaction dropped 14.2 percent year-on-year to RM38.6 billion and volume fell 4.5 percent year-on-year to 94,523 transactions.

It is in stark contrast to the cumulative increment recorded during the first three quarters when volume rose 2.6 percent to 289,537 and value climbed 15.8 percent.

“If anything, it signals that the deliberate measures to cool the market so far have effectively contained property prices from spiralling out of control,” he said.

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