Low interest rate environment: Will the property industry benefit?

KUALA LUMPUR (Aug 8): Will there be a “surge” in market interest for properties with the current low interest rates and “wealth effect” from the stock market?

This is the question posed by The Edge Malaysia in its latest issue.

“Property investment is considered a natural hedge against inflation that can help investors preserve capital, soften the effects of inflation, generate income and create capital appreciation. Also, adding property to a portfolio helps increase investment diversification.

It is like not putting all your eggs in one basket,” executive director of the Associated Chinese Chambers of Commerce and Industry of Malaysia’s (ACCCIM) Socio-Economic Research Centre (SERC), Lee Heng Guie, told the weekly.

He “does not rule out” that monies made from the equity market “may flow into the property market as investors switch to alternative asset classes”.

With the addition of government efforts to boost the local property segment such as the reintroduction of the Home Ownership Campaign (HOC), Lee says “buying sentiment” for real estate may be lifted.

Sunway University economics professor Dr Yeah Kim Leng told the business publication that “studies have found evidence of a spillover from stock market gains into the property market” as “investors seek to diversify their portfolios” while taking advantage of “growth opportunities in other asset classes”.

“The property market, which has been weighed down by oversupply, will be enlivened by a strong stock market performance. But the late-stage rebound will not be as exuberant as during the early market boom,” Yeah added.

Meanwhile, UOB Malaysia senior economist Julia Goh is also of the opinion that some investors may use their profits from the stock market to buy property.

“However, some may still be hesitant to undertake any large commitments, given the uncertain outlook, particularly if there are concerns about job and wage stability,” she added.

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Read the full report in this week’s The Edge Malaysia

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