Are some homebuyers in Malaysia paid to borrow and buy?
Prices are weak in the secondary market, which is reflective of the real underlying property demand, yet strong in the primary market (set by developers). Does this make sense?
Boost home affordability with a more efficient property ecosystem
Home prices have risen rapidly since 1990, fuelled by historically low interest rates and enabled by the then government’s policies (such as home ownership campaigns, Developer Interest Bearing Scheme and a reduction in the real property gains tax) and banks’ aggressive lending for mortgages. As a result, home affordability has declined by half.
What ails the Malaysian residential property sector
Over the last few years, the Malaysian property market has been characterised by sluggish sales and a rising number of unsold homes. Developers are sitting on large stocks of inventories, which are stretching their balance sheets, funded by borrowings from banks, and the debt and capital markets, including issuing perpetual securities. The sector’s poor outlook is reflected in the low valuation of property stocks, most of which are trading at around one-third book value.
How did this situation come about?
