Non performing Loan of Malaysia property loan

Author: Admin Publish Date: 05-09-2019
Updated On:  18-11-2019

When banks are earning higher profits, that's good for all industries as banks are more willing to lend. In a bad economy, banks will be selective as they do not want their non-performing loan (NPL) to go up due to some borrowers being unable to service their debts. If we see a spike in number, we know that the borrowers are no longer able to serve their debts. The potential for the properties to be auctioned off is high and this is usually the start of a loss of confidence and the herd mentality kicks in. As a result, the banks are not willing to lend more to reduce their exposure and buyers will take a wait and see stance.

The NPL of residential property has remained resilient and kept under control but the NPL for non-residential property has been increasing at a steady pace since the year 2014. Non-residential property, which includes, shop houses, factories, serviced apartments and SOHO has been facing a supply glut due to the reckless development by developers. This has caused the buyers not being able to rent out or sell their property at a favourable price. The slump in Ringgit Malaysia in the year 2014, which cause a slow down in the economy has also worsened the ability to pay off their monthly debts. Non-residential property buyers, where a majority of them are business owners, speculators and investors have a much higher risk appetite and higher fluctuation in cash flow and are more susceptible in the slow down of the economy.

In short, the prices of non-residential properties will face a higher pressure in the near term and there is still no light at the end of the tunnel for them. Avoid them at all cost.

Clients can access the number of existing supply, incoming supply and planned supply of various types of property under Real Estate Industry Module.

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