KUALA LUMPUR (Sept 29): First-time buyers of affordable residential property continued to support house prices in Malaysia in the first half of 2021 (1H21) despite the housing market reversing improvements observed in 2H20 as the effects of the positive response to various homeownership incentives introduced by the government subsided.

According to BNM’s Financial Stability Review report for 1H21 published on Wednesday, sustained demand from first-time house buyers for affordable property is expected to mitigate risks associated with a significant house price correction that could undermine household balance sheets and increase potential losses for banks. 

"Limited exposure of banks to loans for the purchase of property by household investors further contained such risks. 

"Despite interest rates being at record lows, existing macroprudential measures have also continued to reinforce prudent lending behaviour among banks, thereby containing a build-up of future risks from a credit-induced residential property price boom such as that experienced in some other jurisdictions,” BNM said.

Globally, the central bank said risks to financial stability remained contained even as a resurgence in Covid-19 infections and lagging vaccine roll-outs, especially in many emerging markets, weighed on the recovery of the global economy in 1H21. 

Policymakers around the world continued to finely balance the need to maintain exceptional policy support for the economy given the outlook that remained clouded by the pandemic, and avoided a build-up of future vulnerabilities from stretched asset valuations, increased risk-taking and higher private-sector leverage amid an extended period of low interest rates. 

"Expectations of normalisation of monetary policy in advanced economies could increase risks for financial systems where the recovery has yet to gain a firm footing and vulnerabilities are more pronounced,” BNM said.

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