PETALING JAYA: Loan demand looks set to recover in the second half of 2020 on the back of the government’s Short-Term Economic Recovery plan (Penjana) and interest rate cuts that will improve homebuyers’ purchasing power.
MIDF Research in a report yesterday said the aggressive overnight policy rate cuts this year is positive to the sector, as it improves homebuyer’s purchasing power by reducing loan installments.
“We estimate monthly installments to reduce by 14%, after 125 basis points cut for RM500,000 loan with loan repayment period of 30 years, which is quite significant in our view.
“Hence, we think the record low interest rate will partly help to alleviate home-buyers’ issue of securing home financing, as the record low yield has boosted affordability.”
Citing Bank Negara’s statistics, MIDF Research said total applied loan for purchase of property improved sequentially by 52.9% month-on-month to RM13.1bil in May, after plunging by 64.8% month-on-month in April.
“Note that total applied loan recorded steep decline in April due to the disruption to business activity following the commencement of the movement control order (MCO).
“Nevertheless, total applied loan in May was lower by 61.8% year-on-year while cumulative total applied loan in the first five months of 2020 was lower by 33.6% year-on-year, indicating buying interest was subdued.”
Looking ahead, the research house expects buying interest to recover in the second half of 2020 due to incentives introduced under Penjana, such as the reintroduction of the Home Ownership Campaign (HOC).
Under the campaign, stamp duty exemption will be provided on the transfer of property and loan agreement for the purchase of home between RM300,000 and RM2.5mil.
Meanwhile, the exemption on the instrument of transfer is limited to the first RM1mil of the home price, while full stamp duty exemption is given on loan agreement effective for sales and purchase agreements signed between June 1 to May 31,2021.
In addition, the government has also announced real property gains tax (RGPT) exemption for Malaysians for the disposal of up to three properties between June 1,2020 and Dec 31,2021.
Separately, MIDF Research said as working from home becomes more common practice, this could eventually spur higher demand for bigger homes.
“Workplace culture changed as the Covid-19 pandemic has led to nationwide employees working from home during the MCO.
“The new remote work culture is expected to be the new normal going forward.
“This may play a role in future home-buyers’ decision making as they may upgrade to bigger spaces and better lifestyle in accommodating to the new work-from-home culture.”
The research house said employees that are renting rooms may consider buying properties for bigger working space, while small families might upgrade to larger houses.
“In a nutshell, we think the work-from-home culture may support demand for owner-occupied property, especially properties within the affordable to mid-range, ” the research house said.
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