Slow mortgages in Malaysia's new tax

Posted by Trading Advisor on 12:47 PM with No comments
[KLSE] Growth in Malaysia's Islamic home loans is forecast by banks to slow from the weakest pace since 2007 as a new tax damps housing demand.

AmInvestment Bank and CIMB Islamic Bank forecast the mortgage market will cool, just as tighter capital rules make lenders more cautious on expansion. The government will introduce a 6 per cent goods and services tax in April, adding to disincentives after regulators cut the maximum tenor on residential property loans to 35 years from 45 in July 2013.
The volume of property transactions is forecast to fall by 3 per cent to 5 per cent in 2015, Loong Kok Wen, a real estate analyst at RHB Research Institute Bhd, wrote in a December report. The central bank forecasts inflation will quicken to as much as 3.5 per cent this year from 3.1 per cent in 2014, while Prime Minister Najib Razak has reduced the economic growth estimate as a slump in oil prices lowers export earnings.

"Demand for mortgages will probably slow this year because people don't want to take on liability obligations in an environment of uncertainty," Mohd. Effendi Abdullah, head of Islamic markets at AmInvestment Bank, the nation's third-largest sukuk arranger, said by phone Feb 4. "GST and rising inflation will also weigh as they will reduce people's purchasing power." Mortgages that comply with Islam's ban on interest climbed 24 per cent in 2014 to an unprecedented 76.8 billion ringgit (US$21.6 billion), central bank data show. That's down from 29.7 per cent growth in 2013 and the slowest since 2007's 9.8 per cent pace. Conventional home financing grew 10 per cent to 298.5 billion ringgit last year, less than the 10.7 per cent increase in 2013.