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MIDF remains 'neutral' on property sector on expectation of further interest rate hikes

03/08/2022 12:25 PM

KUALA LUMPUR, Aug 3 (Bernama) -- MIDF Research has maintained a “neutral” rating on the property sector on the expectation of further interest rate hikes, despite strong loan applications and approvals registered in June.

The research house said while strong property loan applications in June 2022 were positive for the sector, the recent hike in the interest rate and the expectation of further hikes are slightly negative.

Bank Negara Malaysia raised its overnight policy rate (OPR) by 25 basis points to 2.25 per cent on July 6, 2022.

"The hike in the OPR would increase the house instalments of property buyers marginally and reduce the affordability of property buyers,” the research house said in a note. "We estimate that the housing loan instalment for a loan of RM500,000 would increase by 3 per cent for every 25 basis points increase in the OPR." 

Nevertheless, MIDF noted that the “slight negative” from an interest rate hike is expected to be partly cushioned by government incentives to support buying interest.

"The government recently announced the i-MILIKI programme which offers a 100 per cent stamp duty exemption for first-time homeowners who purchase properties priced RM500,000 and below.

"Overall, we see interest rates normalising with the expectation of further OPR hikes dragging slightly on property demand going forward," it said.


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