Financial system won’t collapse due to property glut, say experts

Pong Teng Siew

KUALA LUMPUR: The oversupply of unsold and unutilised properties in Malaysia is unlikely to affect the financial system, at least for now.

The Malaysian Reserve (TMR) quoted experts as saying banks had increased prudence in lending and had adopted more measures to safeguard their stability in the wake of the oversupply, reported to be worth RM35.5 billion.

Inter-Pacific Securities Sdn Bhd head of research Pong Teng Siew told TMR: “The biggest trap to the housing sector is if there is a confluence of high-interest rates and a recession, which doesn’t look imminent, and even then it could cause isolated pockets of problems for the banks, but not necessarily a really problematic issue.”

The National Property Information Centre recently revealed that there were 130,690 unsold residential properties in the country during the first quarter of 2017 – the highest in a decade.

Pong was quoted as saying even though the non-performing loans (NPLs) for residential properties had risen slightly in the past two years, the increase was not out of alignment with the overall growth of loans.

He said a hike in interest rates was very possible at the next meeting of Bank Negara’s monetary policy committee but that it would not cause a collapse in the market.

“A hike would have to involve something like 200bps or 300bps before we see some real damage in the property market,” Pong told TMR.

An unnamed industry analyst told TMR that banks had been very cautious over the last two years.

“At this point, things are still manageable. Banks seem to be stronger this time around (compared with the Asian financial crisis).

“They have better asset quality and far more capital, so there is still sufficient cashflow to tie up any issues,” the analyst said.