The strengthening of the ringgit against the US dollar, driven by positive macroeconomic developments and Bank Negara Malaysia’s (BNM) decision to maintain the Overnight Policy Rate (OPR) at 3.00%, is set to invigorate Malaysia’s property market. This presents a unique opportunity for homebuyers and investors to capitalize on favorable conditions.
Positive Effects of a Strengthened Ringgit on Property Investment
As the ringgit appreciates against the US dollar, property investments become more attractive for foreign investors and locals alike. A stronger currency boosts purchasing power, making Malaysia an appealing destination for property buyers from abroad. For locals, it also reduces the costs of imported materials used in construction, indirectly stabilizing property prices.
Kashif Ansari, co-founder and group CEO of Juwai IQI, emphasizes the importance of BNM’s decision to keep the OPR unchanged. He notes that this decision, along with the possibility of a rate cut in the upcoming Federal Open Market Committee (FOMC) meeting in the US, creates an environment conducive to property market growth.
“Stable interest rates mean consistent borrowing costs for mortgages and development financing. This ensures that existing loans with floating interest rates won’t experience major fluctuations, keeping monthly repayments steady. This stability is crucial for household finances and the property industry,” says Kashif.
Stable Interest Rates: A Boon for Property Buyers
One of the key benefits of maintaining the OPR at 3.00% is the reassurance it provides to property buyers. Those with existing mortgages or prospective buyers can be confident that borrowing costs will remain stable, giving them more certainty in managing their finances. Additionally, stable rates encourage new buyers to enter the market, knowing that their financial commitments will not be subject to significant changes in the near term.
Kashif adds that if the FOMC meeting leads to a rate cut, it may further boost market sentiment. Lower borrowing costs would allow buyers to spend more on homes, driving up demand and potentially leading to price increases. “We expect demand to continue growing at sustainable levels, supported by a stable interest rate environment, without causing irrational exuberance in the market,” he explains.
Historical Context of OPR Impact on Property Market
Property analyst Sr. Samuel Tan echoes these sentiments, drawing on historical data to highlight the positive effects of lower interest rates on the property market. During the COVID-19 pandemic in 2020, the OPR was reduced to a historic low of 1.75%, making it more affordable for new buyers to secure home loans. This move stimulated property transactions as buyers rushed to take advantage of the lower rates.
Since then, BNM has gradually increased the OPR, returning it to 3.00% in May 2023. This rate remains attractive, providing buyers and investors with a stable environment in which to make long-term property investments.
“With the OPR holding steady, first-time homebuyers and those looking to expand their property portfolios can feel more confident about the market’s stability and Malaysia’s economic outlook,” Tan notes.
Optimistic Market Outlook for 2H 2024
The outlook for the Malaysian property market remains optimistic, with experts predicting continued stability in the second half of 2024. BNM’s positive assessment of global growth, resilient job markets, and a recovering electrical & electronics (E&E) sector all contribute to a favorable investment climate. Moderating inflation and a less restrictive monetary environment also provide reassurance to potential buyers.
According to CIMB Securities, the OPR is likely to remain unchanged through the end of 2025, barring any major changes in global or domestic conditions. This extended period of stability offers property buyers an ideal window to enter the market, secure in the knowledge that their financial obligations will remain manageable.
Public Investment Bank Bhd (PublicInvest) has also aligned with this forecast, noting that BNM’s current monetary policy stance is designed to support economic growth while mitigating risks. The introduction of the Employees Provident Fund (EPF) Account 3, which is expected to inject RM30 billion into consumer spending, may further boost property demand by easing some of the financial pressures faced by households.
Opportunities for Property Buyers
For those considering entering the property market, now may be the perfect time to take the plunge. The strengthening ringgit, stable OPR, and positive economic indicators create an environment that is conducive to long-term investment. Buyers can take advantage of favorable financing conditions and a market that is poised for growth.
Juwai IQI has expressed hope that the government will prioritize housing development, particularly in the affordable segment, in the upcoming Budget 2025. Improving living conditions in these areas and boosting supply will help meet growing demand, further stimulating the market.
As Malaysia’s property market continues to evolve, the combination of stable interest rates, a strong currency, and supportive government policies positions the nation as a top destination for real estate investment. Buyers, both local and international, have much to gain from the opportunities presented in the current market landscape.
