Properties priced from RM500,001 to RM700,000 faced the most loan rejections in 1H2016

PETALING JAYA (Sept 14): Properties priced from RM500,001 to RM700,000 faced the highest loan rejection rates, according to almost a quarter of 157 respondents to the Real Estate and Housing Developers’ Association (Rehda) property industry survey 1H2016.

About 24% of respondents agreed that properties in the price range of RM500,001 to RM700,000 faced the highest rejection rates, followed by 23% of respondents for properties in the price range of RM1 million to RM2.5 million, 21% of respondents in the price range of RM250,001 to RM500,000, 19% of respondents for properties in the price range of RM700,000 to RM1 million, 7% of respondents for properties in the price range of above RM2.5 million and 6% of respondents for properties in the price range of RM100,001 to RM250,000.

“Again and again, end financing is the issue for homebuyers today. As you can see from the figures, the bulk of properties which faced rejection rates are the properties in the RM500,001 to RM700,000 price range which are mostly the homes that first time homebuyers and first time upgraders are buying. Those who are buying the RM2.5 million and above properties are not those who need financing because they can afford it,” said Rehda president Datuk Seri Fateh Iskandar Mohamed Mansor who presented the survey findings to the media today.

Fateh noted that the buyers’ profile showed that the bulk of them in 1H2016 were home upgraders and first time homebuyers contributing to 45% and 34% respectively, followed by investors and companies.

“More than half (53%) of these buyers are buying for their own stay, followed by 21% of them buying to upgrade their homes and 16% of them are buying for family members. Only a fraction or 10% of the purpose of purchase is for rental yields,” said Fateh.

“Almost 90% of them are end-users. They are not buying to speculate and only a small number of investors are buying to rent. Maybe in 2010, you can get a rental yield of 6% to 6.5% in hot areas like KLCC. Today, rental yields may be below 5% in these challenging times,” Fateh added.

Some of the financing issues include the credit history of homebuyers, ineligibility of the buyers’ income, lower margin of financing, bank requesting more documents and limited quota for low-cost and affordable housing.

Commenting on the high household debt of Malaysians which has risen from 86.7% last year to 89.1%, Fateh noted that is vital to differentiate good and bad debt.

“About 40% of the debt [of Malaysians] comprises mortgages, while others are automobile loans, credit cards and personal loans. Unlike in a country like Australia, mortgage makes up almost 75% of their household debt. Household debt, today, will create value in the future as property prices will increase,” said Fateh.

Out of the 157 survey respondents, 108 noted that they faced end-financing problems while the remaining 49 did not.

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