Malaysian banks, property developers resilient

Malaysian banks and property developers are resilient to possible shifts in sentiment and falling property prices, says Moody's Investors Service.

In a statement here today, Moody's said the banks were well-positioned to weather a soft landing in property prices, while developers focussing on residential projects in Johor, Kuala Lumpur, Selangor and Penang, would be more challenged.

Moody's senior vice president, Stephen Schwartz, said the agency anticipated a soft landing for Malaysia's property prices, supported by robust, albeit decelerating gross domestic product growth, and stable housing demand from middle-income households.

In such a scenario, Malaysian developers and banks should be resilient to downward property price pressures, said Schwartz.

Moody's vice president Senior Credit Officer, Eugene Tarzimanov, who is one of the authors of the report titled "Malaysia's Property Sector Risks Are Manageable for Banks and Developers", however, was cautious over the mortgages with high loan-to-value ratios and loans to over-leveraged households and developers were at greater risk of payment slippage.

The report said Malaysia has seen a rapid rise in residential property prices of over 40% in real terms since early 2009, against a backdrop of increased urbanisation, rising living standards and a long period of low interest rates.

It said such a price increase has generally outpaced that of Malaysia's neighbors.

The previously-implemented cooling measures, Goods and Services Tax and tighter lending conditions would add to downward pressure on housing prices, it said. - Bernama

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