Malaysia new tax to slow mortgages from '07 Low:
Islamic Finance
[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 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. |
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"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 Am
Investment 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.
Home loans offered to Muslims differ from their
traditional counterparts in that a bank typically buys
the property on behalf of the customer and rents it back
at a markup to avoid interest payments. Some of the more
popular options include contracts such as Ijarah,
Murabaha and Tawarruq.
Prime Minister Najib
increased property gains taxes and imposed curbs on
foreign ownership in October 2013 to cool the market.
While household debt rose 9.9 per cent in the first six
months of 2014, the slowest since 2010, as a proportion
of gross domestic product it held at 86.7 per cent,
according to an October Treasury report.
The
government cut 2015's GDP growth estimate to a maximum
5.5 per cent in January from as much as 6 per cent. A 49
per cent slump in Brent crude prices since June is
crimping revenue for Asia's only major oil exporter.
Malaysia's House Price Index fell 0.4 per cent in the
three months ended September, the first quarterly
decline since 2008, according to the most recent data
from the finance ministry.
"Consumers are likely
to become more cautious in light of the weak sentiment,
softening the property market," Dzulkifly Aminuddin,
head of consumer financial services at OCBC Al-Amin Bank
Bhd. in Kuala Lumpur, said in a Feb. 6 e-mail. "With
uncertainties on the economy and access to financing
more difficult now, it's not surprising that mortgage
businesses are affected." May bank Islamic Bank Bhd, a
unit of Malaysia's biggest lender by assets, doesn't
expect the GST to have a major impact on home loans,
Chief Executive Officer Muzaffar Hisham said in an
e-mail Monday. The lender will review feedback and
adjust its strategy accordingly to ensure sustainable
growth, he said.
While mortgage demand is
slowing, the nation's Islamic banking assets more than
doubled to a record 543 billion ringgit in the past five
years, according to Treasury Department data from
October, the most recent available.
Market Blip
It's also proving to be the slowest start to a year for
suck sales since 2010 in the world's biggest
Sharjah-compliant debt market. Offerings total 1.8
billion ringgit so far in 2015, the least since 90
million ringgit in the same period of 2010, data
compiled by Bloomberg show. Issuance was 62 billion
ringgit last year and a record 95.8 billion ringgit in
2012.
The implementation of new capital-adequacy
requirements for banks worldwide known as Basel III will
also make lenders cautious in expanding credit,
according to CIMB Islamic Bank. Lenders have until 2019
to comply with the ruling that will provide a buffer
against losses following the financial crisis.
Buyers will adopt a wait-and-see attitude before the
implementation of GST, said Badlisyah Abdul Ghani, chief
executive officer at Kuala Lumpur-based CIMB Islamic
Bank.
"This year could be a blip in the local
Islamic mortgage market," Badlisyah said in a phone
interview Friday. "Once economic conditions stabilize
and concerns about the GST are allayed, demand for home
loans is expected to pick up again next year."
Source:
The Business Times
, dated
10/02/2015 |