Bankers says new goods and services tax likely to slow mortgages

KUALA LUMPUR: 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.

Am Investment Bank Bhd and CIMB Islamic Bank Bhd forecast the mortgage market would cool, just as tighter capital rules make lenders more cautious on expansion.

The Government will introduce a 6% goods and services tax (GST) 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% to 5% 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% this year from 3.1% in 2014, while Prime Minister Datuk Seri Najib Tun 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,” Datuk 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% in 2014 to an unprecedented RM76.8bil, central bank data show.

That’s down from 29.7% growth in 2013 and the slowest since 2007’s 9.8% pace. – Bloomberg