The growth of home loan applications from households and people may slow this year, says Firdaos Rosli, chief economist of Bank Islam Malaysia Bhd.
According to him, the fall in loan requests and approvals began in August 2022, probably as a result of banks tightening their credit standards, monetary policy normalisation, and rising living expenses.
The overnight policy rate (OPR), consumer confidence, and inflation expectations are additional variables influencing loan growth in the real estate industry.
Firdaos said that several factors affect the rise of loans.
"The OPR is one factor as a historically low rate, as seen during the lockdown, resulted in higher loan growth. Consumer confidence and inflation expectations also play a role apart from other external factors such as geopolitical problems, high global oil prices, as well as the interest rate in the United States that is unlikely to fall this year and may even rise slightly," he said.
Firdaos was speaking at the 2023 Malaysian Housing and Property Summit, titled "Reimagining Development in the Post-Pandemic Era," in Kuala Lumpur yesterday.
According to him, these elements could lead to a decline in consumer confidence this year compared to last year.
He said the government's response is crucial because this would influence the growth of the GDP in 2023.
The real estate industry benefited from the robust 8.7 per cent GDP growth experienced in the previous year. The number of overhang units declined since the middle of 2022., while the reopening of the Malaysian economy led to an increase in loan requests and approvals.
Firdaos said this led to an economy that grew quickly, propelled by private sector demand with favourable spillover effects on the real estate industry.
The GDP growth for this year is predicted to be 4.5 per cent by Bank Islam.
According to forecasts from the International Monetary Fund (IMF), one of the things that would happen by 2025 is that Malaysia's revenue to GDP will be among the lowest in ASEAN, behind Laos and Indonesia, if the issue of government revenue is not raised.
"The fall in GDP growth is due to a global economic slowdown, especially in the developed countries, higher borrowing costs, lower fiscal injection, and a decline in manufacturing and international trade. Apart from these factors, a lower growth rate in salaries and wages against last year's growth rate also played a role," he said.