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Housing market and implications on financial stability [21-03-2013]  
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RISKS to financial stability from price adjustments in the housing market are contained as the central bank has heightened supervisory scrutiny over bank lending practices.

Impaired financing for the residential property sector by the banking system remained low at 1.9 per cent of total financing for purchase of residential properties last year, compared with 2.3 per cent in 2011.

Risks to financial stability from house price developments remain modest and recent steeper increase in house prices has not been influenced by changes in banks' credit policies.

This was the conclusion of the International Monetary Fund in a separate assessment of price developments in the Malaysian housing market last year, which showed that the increase in the rate of loans for the acquisition of residential properties has remained stable relative to current and future expectations of borrowers' income in the credit market.


The increase in house prices over the period of 2001 to 2012 has been largely driven by macroeconomic factors.

Economic growth, changes in demography and inflation are the main drivers of house prices as are, to a lesser degree, financial variables, government regulations and policies, and previous values of the houses.

However, together with recent government measures to raise the real property gain tax, increase housing supply and improve public transportation, these measures are expected to support a more sustainable trend in house prices going forward.


Source:BUSINESS TIMES
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