Bank Negara’s OPR Stability Boosts Malaysia Real Estate Market

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Bank Negara’s decision to maintain the OPR at 3.00% provides stability and affordability in Malaysia’s real estate market, benefiting homeowners and investors.

Kuala Lumpur, 08 Sep 2023 – Amidst rising interest rates in Southeast Asian countries, Bank Negara Malaysia’s decision to maintain the Overnight Policy Rate (OPR) at 3.00% has provided reassurance to Malaysia’s real estate market.

In countries like Singapore and Thailand, benchmark interest rates have seen increases over the past year. Singapore’s benchmark rate, known as the Singapore Overnight Rate Average (SORA), rose from 3.029% to 3.674% between January and August. Many mortgages in Singapore are linked to SORA.

Thailand’s central bank raised its policy rate for the seventh consecutive time in August, reaching 2.25%. Conversely, Indonesia’s benchmark interest rate remained stable at 5.75%.

Bank Negara Malaysia took proactive steps by raising rates earlier than other central banks. This move helped prevent inflation from soaring to the levels seen in the US and Eurozone.

Kashif Ansari, co-founder and CEO of Juwai IQI, stated that Bank Negara’s future rate decisions will depend on the country’s economic strength and inflation rates. Homeowners hope for a robust economy that supports employment and income growth without triggering rate hikes that could raise mortgage costs.

Bank Negara surprised observers in May by raising the OPR by 25 basis points from 2.75% to 3.00%, restoring it to pre-pandemic levels. The central bank maintained this rate following the July Monetary Policy Committee meeting. Since May 2022, the OPR has increased by a total of 125 basis points, the fastest rate hike in recorded history, aimed at curbing inflation and stabilizing the economy.

Bank Negara’s decision to keep the OPR steady at 3.00% during its recent MPC meeting has brought reassurance to Malaysia’s real estate market. The stable OPR promotes market certainty and affordability, facilitating developers in creating new housing projects for Malaysians.

This decision is expected to further strengthen the residential real estate market, marked by rising transactions and a diminishing property overhang. With each 25bps increase in mortgage interest rates, monthly payments for a RM500,000 loan with a 30-year term and a 5% interest rate would rise by approximately RM77.

In essence, Bank Negara’s decision to maintain the OPR ensures that housing remains relatively affordable, benefitting both homebuyers and property owners. Landlords are not compelled to increase rents for their tenants, contributing to market stability. Looking ahead, experts anticipate that Bank Negara will continue to leave rates unchanged at its upcoming meeting in November. Malaysia’s inflation, economic growth, and interest rate environment appear relatively favorable compared to neighboring countries in the region.

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