PETALING JAYA (Dec 4): AmInvestment Bank expects the property market to remain subdued in 2018 as elevated home prices, low financing margins by banks, and high debt-service ratios (DSR) among prospective homebuyers continue to plague the market.

The DSR is calculated by dividing a person’s debt service obligations by their income.

“Potential house buyers may have little room left to take on a home mortgage due to their existing debt service commitment (arising from outstanding study, car or personal loans), while their incomes have not kept pace with the commitments,” it said in a report about developer Titijaya Land Bhd today.

The investment bank noted that most banks observe a 60% threshold for the low-income group, and up to 80% for the high-income group.

“We believe the issues could be partially addressed with affordable housing, coupled with more flexible financing plans offered by the low-income group such as a ‘step-up’ scheme initiated by Perbadanan PR1MA (where borrowers only service interest but not the principal in the first five years) as well as a ‘rent-to-own’ scheme introduced by a local bank recently,” it said.

Maybank Islamic Bhd had recently launched its HouzKEYS scheme on a pilot basis among Malayan Bank Bhd’s (Maybank) employees, with a public launch expected early next year.

HouzKEY is an alternative method of home financing by way of lease arrangement based on the Islamic concept of Ijarah (lease) that provides customers with the option to purchase the property.

Meanwhile, AmInvestment Bank said Titijaya Land’s focus and strength is right in the affordable segment.

“Its earnings visibility is strongly backed by RM409 million unbilled sales and some RM1.75 billion planned launches in FY18 comprising The Shore @ Kota Kinabalu (mixed development), 3rdNvenue @ Jalan Ampang (mixed development), Riveria KL Sentral (mixed development), and Damansara West, Bukit Subang (township). It has set itself a FY18 sales target of RM500 milionl, versus RM355 million it achieved in FY17,” it said.

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