Insight - Property and auto loans to pick up

RHB Bank Bhd expects its receivables or amounts owed in its property and auto portfolios, to grow and contribute towards its retail banking business, said RHB Bank group retail banking head Rakesh Kaul. (pic)

THE banking and corporate sectors expect property and automotive loans to revive in tandem with the nation’s economic recovery.

However, some see that the property sector is still slow in recovering, while pick-up in the auto sector may still depend on extension of incentives.

Amid concerns over high household debt in Malaysia, banks are monitoring their loans portfolio, and they expect a gradual improvement in repayments.

Public Bank Bhd will continue to leverage on the incentives to stimulate the property and auto sectors, and expand its lending activities in support of recovery, said Public Bank CEO Tan Sri Tay Ah Lek. (pic below)

Incentives include the re-introduction of the Home Ownership Campaign, the lifting of the 70% limit on the margin of financing applicable for the third property onwards, valued at RM600,000 and above, as well as exemption of the real property gains tax for the disposal of residential homes.

In the auto sector, the extension of sales tax exemption until June 30, coupled with launches of new vehicles since the fourth quarter of 2020, will drive demand for new vehicles as well as hire purchase loans.

Public Bank is actively engaging with its customers and offering further financial assistance to those who had lost their jobs or encountered income reduction.

“The group shares concerns over the nation’s high household debt and has always emphasised responsible lending by assessing customers’ affordability and needs before approving their financing, ’’ said Tay.

CIMB Bank Bhd anticipates a gradual growth in mortgages in 2021, following a slight moderation in property prices in 2020 when developers continued to launch projects that are affordable and strategically located.Lower borrowing costs, the option to defer instalment plans and incentives for first-time home buyers, are among some of the relief measures for home buyers.

Since May 2020, CIMB has seen a recovery for the auto sector, and it expects demand for passenger cars to improve steadily.

“Post the movement control order 2.0, the majority of borrowers have resumed payments, and a similar trend of healthy loan repayments, contingent on Malaysia’s recovery is expected, ” said CIMB.

RHB Bank Bhd expects its receivables or amounts owed in its property and auto portfolios, to grow and contribute towards its retail banking business, said RHB Bank group retail banking head Rakesh Kaul.

RHB Bank has seen a reducing trend in applications for further extension of payment assistance since the first quarter of 2021.In March 2021, more than 90% of accounts in loans and financing facilities in RHB Bank, had received payments, including those with or without payment assistance.

Alliance Bank Malaysia Bhd expects the residential sector to remain challenging for the time being, due to the impact of unemployment, salary reductions and movement controls.

Property developer Mah Sing Group Bhd expects the recovery momentum to continue, as business sentiment improves on the vaccination program entering its second phase.However, housing loan eligibility has been a major challenge, while difficulties in securing maximum loan margins continue to affect potential home buyers, said Mah Sing CEO Datuk Ho Hon Sang.

The demand for loans will be spearheaded by the recovery, as employment and industries recover, and new businesses emerge.

For now, Alliance Bank sees that the rate of repayments is reasonably good, but it needs to remain vigilant as the pandemic is not over yet.

OCBC Bank (M) Bhd sees soft demand for property loans although incentives had been put in place, mainly for the primary market.There also remains some concerns on overpricing, said OCBC Bank country chief risk officer Thor Boon Lee.

Loan repayments are coming in well, and the vaccination programme could be the catalyst for a speedier recovery, added Thor.

Property developer Mah Sing Group Bhd expects the recovery momentum to continue, as business sentiment improves on the vaccination program entering its second phase.However, housing loan eligibility has been a major challenge, while difficulties in securing maximum loan margins continue to affect potential home buyers, said Mah Sing CEO Datuk Ho Hon Sang.

Any new schemes from the government to help home ownership would also benefit the property sector.

Proton Commerce Sdn Bhd expects that despite the impact of Covid-19, consumer sentiment with regard to purchase of cars, remains positive.

The hire purchase (HP) market is expected to grow in the second quarter of 2021, said Proton Commerce CEO Mooi Fi Phang.

This will be aided by the festive celebrations and increased delivery of car models with large outstanding orders, such as the Proton X50.

But the growth in new car sales may slow down in the second half if the government decides not to extend sales tax exemptions for new cars beyond the end of June 2021, said Mooi.

In 2020, the HP market grew 5% to RM165bil, while total industry volume had contracted about 12% to 529,434 units.

The average age of borrowers points towards Malaysians buying cars at an increasingly young age.

Generally, the view is that the property and auto sectors have yet to recover.

Fortress Capital CEO Thomas Yong sees that buyers who had held back on their purchases on expectation of lower prices, have re-entered the property market, as sales in the fourth quarter of 2020 have improved over the same period in 2019, especially for residential properties.

But sales of new property launches in 2020 had been on the low side, due to, among other things, the sizeable overhang, said former RHB Research Institute chief Asean economist Peck Boon Soon, adding that property sales are unlikely to pick up strongly in the next few months amid a slow roll-out of the vaccination programme.

In terms of purchase of big ticket items, people are still exercising caution, said Etiqa Insurance and Takaful chief strategy officer Chris Eng.

The pick-up in demand for the purchase of cars and residential properties in the second half of 2020 has slowed down recently, said Socio Economic Research Center executice director Lee Heng Guie.

Despite sitting on a pile of accumulated savings, some buyers adopt a wait-and-see approach amid cautious sentiment and a weak job market.

The jump in car sales in March could be due to the backlog in registration of cars on late delivery of some car marques, said Lee.

Many sectors are currently “flat on their belly”, said former Inter-Pacific Securities head of research Pong Teng Siew, adding that it will take the economy four to five years to fully recover.

Confidence needs to be rebuilt and economic activities need to be robustly reactivated, said Areca Capital CEO Danny Wong.

Many sectors are still lagging and very few are really doing well; efforts towards recovery needs to be speeded up. Yap Leng Kuen is a former StarBiz editor. The views expressed here are the writer’s own.