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RHB Research sees property sales growth tumbling 75pc

Tightening credit will drive demand towards more affordable property, said RHBRI. — File picTightening credit will drive demand towards more affordable property, said RHBRI. — File picKUALA LUMPUR, Jan 5 — Property sales growth is expected to fall to around a quarter of what it was in the last two years due to the projected lower GDP expansion and continuing euro zone crisis, RHB Research Institute (RHBRI) said today.

“We reiterate that, property sales are highly driven by the macroeconomic factors, i.e. the ultimate GDP growth, as seen in the last 20 years,” it said in a note.

“Given RHBRI’s estimated GDP growth of 3.6 per cent for 2012, we expect overall property sales to slow to around 5 per cent this year, following a remarkable 21 per cent and 20 per cent growth in 2010 and 2011 (based on annualised 1H numbers) for residential segment.”

Buyers were now taking longer to decide on property purchases, the research house noted, adding that large-scale projects such as SP Setia’s KL Eco City have already seen pullouts in bookings.

RHBRI added that it still expects property demand to gradually switch to the affordable or mass housing segment as demand for high-end properties dry up due to affordability issues and tighter financing.

Bank Negara Malaysia issued stricter lending guidelines last year, requiring banks to use net income rather than gross income to calculate debt service ratio for loan approvals.

The guidelines, which came into effect on January 1, cover all consumer loan products including housing loans, personal loans, car loans, credit card receivables and loans for the purchase of securities.

The move was introduced to rein in household debt, which stood 76 per cent to GDP, the second-highest in Asia after South Korea.

Despite “wobbly” fundamentals, RHBRI has upgraded the property sector from underweight to neutral, noting that property stocks had likely bottomed out in the fourth quarter of 2011 and the market did not expect further regulatory measures.

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