The housing market is anticipated to maintain its recovery momentum, aided by gradual improvements in income and business conditions, as well as policy measures.

The measures include extending the complete stamp duty exemption for properties priced at RM500,000 or less, as well as a 75 per cent stamp duty discount on properties priced above RM500,000 up to RM1 million.

Despite increasing inflationary and borrowing costs, Bank Negara Malaysia believes the housing market will recover.

According to BNM's Financial Stability Review for the Second Half of 2022 (2H 2022), which was published today, real estate transactions remained above pre-pandemic levels during the period, with greater transactions for properties priced at RM500,000 or less.

It stated that activity in the housing market remained robust in 2H 2022, following the resumption of economic activities and better job conditions.

The growth in house prices, as measured by the Malaysian House Price Index, trended higher towards its long-term average – third quarter 2022 at 5.1 per cent, and 1H 2022 at 2.5 per cent. The 2015 to 2019 average was at 5.3 per cent, it said.

According to BNM, the incoming supply of newly launched residential properties has continued to shift towards the mass market sector, with 44.3 per cent of properties priced at RM300,000 or less, up from 38.4 per cent in 2021 and an average of 35.2 per cent from 2015 to 2019.

"This was a positive development in helping to reduce further risks of demand-supply imbalances," it said.

Nonetheless, BNM stated that the property market remains vulnerable due to the persistent demand and supply imbalances.

According to the BNM report, the number of unsold housing units has been declining but has stayed high compared to the historical average of 151,683 units, after reaching a peak of 183,918 units during 4Q 2021, compared to the 2015-2019 average of 130,210 units.

Based on the report, this includes overhang and unsold under-construction units (35.6 percent and 64.4 percent of total unsold units, respectively) for residential, serviced flats, and small office, home office (Soho) units.

BNM said that nearly two-thirds of these units have remained unsold for more than three years, owing to price levels that are out of reach for most households, especially in key states.

Because there are no significant concentrations of these units in key areas or projects, the slow take-up rate of these units is not anticipated to significantly depress wider house prices, it said.

"Projects with high levels of unsold units, that is above 80 per cent unsold rate, accounted for only 10 per cent of total projects with unsold units. This reduces the risk of large numbers of developers engaging in widespread and deep price cuts to clear unsold stock, which could have broader spillovers to the housing market," it said.

Improvement in financing activity

According to the central bank, financing activity for buying residential property improved in 2H 2022, in line with market activity, and loan applications rose across all price ranges.

With better insight into repayment behavior, banks have been more willing to approve housing loans while conducting prudent loan affordability assessments, it said.

"This has resulted in the overall loan approval rate recovering above its pre-pandemic average level of 76.4 per cent (2021: 73.4 per cent; 2015-2019 average: 75.9 per cent), the central bank said.

In the meantime, the central bank announced the introduction of a standardised housing loan and house financing agreement for retail borrowers/customers.

The initiative aims to improve service delivery quality, increase consumer comprehension and comparability of key terms and conditions, and simplify the language in such agreements, including borrowers'/customers' and financiers' responsibilities and obligations.

As part of the implementation of the standardised housing loan and financing agreement, financial institutions are required to cease imposing any fee, whether directly or indirectly, on housing loan and home financing documents to lawyers, with effect from Feb 1, 2023.

The Association of Islamic Banking and Financial Institutions Malaysia (AIBIM) applauded the move, stating that standardising the housing loan and home financing agreement for retail borrowers is a major step forward in improving customer protection in the financial industry.

"This move reinforces the central bank's commitment to promoting fair consumer outcomes in the financial industry," its president, Mohd Muazzam Mohamed, said.