KUALA LUMPUR: Property prices are sticky down despite the current slowdown, according to MKH Bhd group managing director Tan Sri Eddy Chen.
“For the genuine developers, house prices will not drop because they set the price where it will give them a reasonable return. Most developers work on the margin of 15%. For those with a better location, they are maybe looking at 20%. So, it’s unlikely for genuine developers to drop their prices by very much,” said Chen during his presentation at “18th Malaysia Strategic Outlook Conference 2016” yesterday.
Even with the softer demand, he believes the prices will be maintained at current level, at least.
Among the challenges that property developers are facing include the various cooling measures that were introduced, liquidity issues, and the country’s high household debt ratio, Chen pointed out.
According to Chen, the housing loan rejection rate of 70% is considered quite high. One factor that attributed to the high rejection rate is the falling short of disposal income requirement among the house buyers.
He also said that the affordable housing projects are the segment with the highest loan rejection rate.
Chen also pointed out that the income growth is not aligned with the property’s price appreciation. The reliance on foreign labour has impacted the income growth and this has caused the issue of affordability among house buyers.
On impact of the slowdown in the secondary market, he said that the effect will be minimal because a lot of these secondary markets were bought at a much lower level than the current price.
This article first appeared in The Edge Financial Daily, Jan 27, 2016. Tap here to subscribe for your personal copy.