Unclear how loan-to-value ratio will impact loans growth

PETALING JAYA: The impact of any lower loan-to-value ratio (LVR) for mortgages on the banking system loans growth is still unclear, but analysts do expect loans growth to take a hit if the measure is pushed through.

Kenanga Research, in a report, said if measures to cool the property market were implemented, a move that is being studied by Bank Negara, there could be a negative impact on mortgage applications.

The research house said that the consumer segment was still “the sole driver for banking system loans growth” based on Bank Negara’s monthly statistical bulletin for July.

It said there were signs of a slowing down in loans growth, with growth in the business segment unsustainable compared to the strong performance earlier in the year.

“Going forward, we’re cautiously optimistic about the outlook of loans growth from the business segment with the easing of the business loan momentum,” it said.

It was reported last month that the central bank was exploring possible measures to curb excessive speculation on property prices by having a cap on the LVR to 80% from 90%.

TA Securities Holdings Bhd analyst Wong Li Hsia told StarBiz that the impact to loans growth would really depend on the manner of implementation.

“There will likely be an impact but we don’t know at this point how serious it will be as Bank Negara has yet to issue any guidelines on how it’ll be implemented,” she said.

According to other analysts, preemptive measures would only have a temporary effect on speculation as buoyant consumer sentiment and demand for good locations were expected to sustain property prices.

They said based on last October’s imposition of the 5% property gains tax, there could be a “short-term knee-jerk reaction” where demand cooled off for a while and property buyers became more discerning.

CIMB Investment Bank Bhd research head Terence Wong had suggested in an earlier report that should the measure be implemented, it should be on landed residential properties where prices have surged in certain locations instead of across the board.

However, HwangDBS Vickers Research analyst Yee Mei Hui said in a note yesterday that blanket measures were unlikely to be imposed given the differing level of speculation in the various segments of the property market.

“We believe first-time and mass residential buyers may be spared (similar to regional markets),” she said, adding that properties below RM500,000 constituted 94% of last year’s transaction volume and 68% of value.

By The Star