Rate cut raises demand for property refinancing

KUALA LUMPUR, Feb 17 — Bank Negara Malaysia’s decision to cut the overnight policy rate by 75 basis points to 2.5 per cent recently will push up demand for property refinancing activity, Rahim & Co Research Sdn Bhd’s executive chairman Datuk Abdul Rahim Rahman said today.

This, he said, is expected to take place within three to six months from now. Abdul Rahim said buyers were currently adopting a wait-and-see attitude, hoping for property prices to fall further.

“The reduction in interest rate will definitely encourage people though at the same time the banks are more cautious in lending,” he said.

“But from what we see, it will definitely see an increase in applications for refinancing as the banks are also giving more incentives, such as not having to pay any fee to migrate to their banks for refinancing.”

He also said that the stimulus package introduced by the government as well as developers offering more extra packages for housing loans were also among

factors to spur the refinancing activity. Speaking to reporters here, Abdul Rahim said Malaysia’s property industry is expected to pick up a year later after recovery of the country’s economy.

“In 1997, it took between three and four years to recover but we were really affected then. But now our economy is much more stable and it will recover within two years, depending on the government’s effort in building up the economy,” he said.

Abdul Rahim said though some property launches have been deferred but the trend will only continue until the third quarter of this year. “We at Rahim & Co have advised our clients to defer the launches. In fact, these launches were actually scheduled for December and early this year,” he said.

“We have advised them to evaluate the situation in the middle or third quarter this year, especially for high-end projects, which I think the demand is very weak.”

According to Abdul Karim, it is not wise to launch luxury condominiums and landed properties at this moment due to slower demand amid the current gloomy economic situation.

He said high-end condominiums, especially those in the Kuala Lumpur City Centre (KLCC) area, will see 15 to 20 per cent drop in sales as most of the buyers within the area are foreigners. “Some of the buyers are from overseas and because of such buyers being affected by the economic downturn, there is now a softening in demand in the KLCC area,” he added.

The KLCC, which houses over 12,000 units of apartments currently, will see more than 1,000 units being completed over the next one to two years.

On the office market, Abdul Karim said the rental value is likely to go down by 10 to 15 per cent as more than eight to 10 million square feet of office space are expected to be completed by 2010 to 2011.

“When these come into the market, it is going to affect the supply and demand situation of office buildings, with some effect on the rental, which is very stable now,” he said.

Under the current situation, the prices did not show any indication of picking up in the near future, he added.