Rehda: End-financing woes, loan rejection continue to dampen property market

PETALING JAYA: End-financing issues and loan rejection remain the top reasons for unsold properties in Malaysia, said the Real Estate and Housing Developers’ Association Malaysia (Rehda).
Rehda president Datuk Seri Fateh Iskandar Mohamed Mansor said end-financing issues have plagued the property market since 2014.
“Demand is still strong but buyers are not getting the desired end financing. Based on feedback from buyers, most banks are giving 75% to 80% today,” he told reporters at a briefing on Rehda’s Property Industry Survey 1H 2016 yesterday.
Fateh Iskandar said although the 70% loan to value ratio only applies to purchase of third properties and beyond, many first-time home buyers are getting 75% financing from banks.
The top five financing issues faced by buyers are: credit history (CCRIS, or Central Credit Reference Information System/CTOS, a credit reporting agency); ineligibility of buyer’s income; lower margin of financing; bank requesting more documents; and limited quota for low-cost/affordable housing.
Rehda’s survey, which was carried out between January and June this year among its members, reported that the majority (24% of respondents) of loan applications rejected by banks were for properties within the RM500,001 to RM700,000 price range.
This is followed closely by properties in the RM1 million to RM2.5 million price range (23%), properties in the RM250,001 to RM500,000 price range (21%) and properties in the RM700,001 to RM1 million range (19%).
Of the total 157 respondents, 71% had unsold units in 1H 2016, an increase from 62% in 2H 2015. In 1H 2015, 78% of respondents said they had unsold units.
The number of first-time buyers fell by 13% in 1H 2016. During the six-month period, first-time buyers made up 34% of all buyers compared with 47% in 2H 2015.
Upgraders made up 45% of buyers in 1H 2016 compared with 39% in 2H 2015 while investors made up 18% of buyers in 1H 2016 compared with 13% in 2H 2015.
In terms of business operations, 52% of respondents said that their cost of doing business increased up to 10% while 43% reported no changes in cost and 5% reported reduction in cost.
Among the cost- cutting measures implemented were recruitment freeze, less benefits/perks, less working hours, restructuring, retrenchment and salary reduction.
To boost sales, developers have resorted to creative strategies including freebies, reviewing selling prices (including rebates) and financing/easy payment schemes.
Fateh Iskandar said developers participated aggressively in exhibitions and Rehda’s Malaysia Property Exposition reported record number of participants in 2015 and 2016.
Meanwhile, 31% of respondents said they offered affordable housing in 1H 2016 compared with 43% in 2H 2015. Fateh Iskandar said one of the challenges in providing affordable housing is compliance cost, which has grown from 8% about seven years ago to 24-25% today.