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Malaysia’s Economy Rebounds In Q1 2022, OPR Hike A Negative Incentive For Property Sector, And More

10th May – 17th May

Malaysia’s economy grew 5% in the first quarter of 2022, rebounding from the 0.5% contraction registered over the same period last year.

Meanwhile, the country is expected to see a reduction in property buying tendencies following Bank Negara Malaysia’s (BNM) decision to raise the Overnight Policy Rate (OPR).

1) Malaysia’s economy rebounds in Q1 2022

Malaysia’s gross domestic product (GDP) grew 5% in the first quarter of 2022, rebounding from the 0.5% contraction registered over the same period last year.

The positive economic performance came on the back of improving domestic demand as economic activities normalise as the government eased containment measures, reported Bernama.

“The improvement also reflects the recovery in the job market, with the unemployment rate declining further to 4.1% (Q4 2021: 4.3%), as well as continued policy support,” said Bank Negara Malaysia.

BNM Governor Tan Sri Nor Shamsiah Mohd Yunus expects the domestic economy to improve further this year, with growth forecasted to be between 5.3% and 6.3% in 2022.

Related article: What Will Happen To Your Home Loan If The Economy Deflates Or Inflates?

2) OPR hike a negative incentive for property sector

Malaysia’s Economy Rebounds In Q1 2022, OPR Hike A Negative Incentive For Property Sector, And More
Malaysia’s Economy Rebounds In Q1 2022, OPR Hike A Negative Incentive For Property Sector, And More

Malaysia is expected to see a reduction in property buying tendencies following Bank Negara Malaysia’s (BNM) decision to raise the Overnight Policy Rate (OPR).

“The property sector specifically, we can say — very synthetically — that the rise in the interest rate is a negative incentive because, to put it simply, it increases the cost of borrowing,” Centre for Market Education Chief Executive Officer Dr Carmelo Ferlito told The Malaysian Reserve.

He noted that the extent to which the buying behaviour will be affected depends on the mood of the buyers as well as their general sentiment on the national economy.

The central bank’s Monetary Policy Committee (MPC) raised the OPR by 25 basis points to 2% from a record low of 1.75% since July 2020, amid inflationary pressures arising from improved labour market and the reopening of the global economy.

Related article: Overnight Policy Rate (OPR) In Malaysia: Why It’s So Important

3) Property developers to face margin compression amid rising building material costs

MIDF Research has maintained its Neutral call on Malaysia’s property sector as it expects property developers to face moderate margin compression in the near term due to rising cost of building materials.

The research house attributed the rising building materials cost to the increasing cost of petroleum products, reported the New Straits Times.

Malaysia’s Economy Rebounds In Q1 2022, OPR Hike A Negative Incentive For Property Sector, And More
Malaysia’s Economy Rebounds In Q1 2022, OPR Hike A Negative Incentive For Property Sector, And More

“While we reckon that property developers may partially pass on the higher building materials cost to property buyers by raising property selling prices marginally, we think that property developers are likely to face slight margin compression in the near term as they may not be able to fully pass on the cost increase to property buyers considering the present subdued property market,” said MIDF Research in a note.

Related article: 5 Ways To Minimise Construction Costs In Malaysia

4) Building materials cost index up in April

The Department of Statistics Malaysia (DoSM) revealed that the Building Material Cost Index (BCI) with and without steel bars has increased for all building categories by 0.1% to 3.6% in April, with Peninsular Malaysia posting increases of 0.6% to 3.4%, Sabah between 0.1% and 2.4% and Sarawak between 0.8% and 3.6%.

Datuk Seri Dr Mohd Uzir Mahidin, Chief Statistician of DoSM, shared that almost all building materials such as sand, cement, steel, aggregates, roofing materials, bricks and wall as well as ceiling materials registered increases in April, reported Bernama.

Without steel bars, the BCI for all regions within Peninsular Malaysia rose between 0.9% and 3.4% for almost all building categories.

“The BCI without steel bars in Sabah and Sarawak increased between 0.3% and 3.6% for almost all categories of building,” he said.

5) Over 5,000 affordable homes to be built in Johor this year

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Johor Menteri Besar Datuk Onn Hafiz Ghazi has revealed plans to build over 5,000 affordable housing units in Johor for the low-income (B40) group starting this year.

In his official Facebook page, he shared that the houses will be affordable priced – from RM40,000 to RM150,000 each, reported Bernama.

“The state government is committed to ensuring that at least 5,033 affordable housing units would be completed by this year and the following year,” he said.

Meanwhile, the state government’s affordable housing plan for the middle-income (M40) group is also undergoing some fine tuning, he said.

Related article: Buying A House: Tips On Getting The Right Subsale House

6) Sabah expects more MM2H applications from China nationals

Sabah expects to receive more applications for the Malaysia My Second Home (MM2H) programme from China nationals once the state officially unveiled the program’s new rules.

Notably, the Sabah Cabinet has passed new regulations for the MM2H programme after Prime Minister Datuk Seri Ismail Sabri Yaakob has agreed that Sarawak and Sabah can formulate policies that are better suited to local sentiments and strategies, reported The Borneo Post.

“Once the Sabah Government makes the official announcement of the new MM2H regulations, we can expect to attract more Chinese applicants to the state, which in turn, will stimulate the local economy and benefit other industries including healthcare, insurance and real estate,” said Dato’ Sri Tiong King Sing, Prime Minister’s Special Envoy to China.

7) Value of construction work completed declines 6.1% in Q1 2022

The Department of Statistics Malaysia (DOSM) revealed that the value of construction work done during the first quarter of 2022 contracted 6.1% to RM29.5 billion from the previous year.

In Q1 2022, Selangor registered the highest value of completed construction work with RM6.9 billion, said Datuk Seri Dr Mohd Uzir Mahidin, Chief Statistician at DOSM. It is followed by the Federal Territories and Sarawak with RM5.8 billion and RM3.3 billion, respectively, reported Bernama.

The civil engineering subsector continued to be biggest contributor to the value of completed construction work at 35.1%, followed by the non-residential buildings subsector at 30.4%. The residential buildings and special trades activities subsectors, on the other hand, contributed 24.2% and 10.2%, respectively.