OPR decision looms large over property market
KUALA LUMPUR: The decision on the overnight policy rate (OPR) is more than just a routine monetary move — it could significantly reshape the property market.
For developers, the direction of the rate will determine the cost of financing new projects. For homebuyers, especially first-time buyers, it could mean the difference between affording a home or being priced out.
If the Monetary Policy Committee maintained the rate, developers could plan projects confidently, especially in key urban centres like Kuala Lumpur and Johor Bahru, according to Dr Muhammad Najib Razali, an associate professor in property economics and finance at Universiti Teknologi Malaysia.
He said the steady rate has already contributed to a rise in residential construction, with housing starts increasing over 20 per cent year-on-year in 2024.
For homebuyers, Najib said a stable OPR helps keep mortgage rates predictable, supporting affordability and purchasing power, especially for first-time buyers and those with variable-rate loans.
However, he warned that these trends mask deeper structural problems, with the core issue being that much of the new housing supply remains priced beyond the reach of average Malaysians.
Even if rates stay low, he said affordability is hampered by upfront costs, loan eligibility barriers and a persistent mismatch between available units and what they can afford.
"If the central bank decides to cut the OPR, borrowing costs would decrease, which could provide a temporary boost by making mortgages cheaper and potentially encouraging more purchases in the affordable segment.
"Developers, in turn, could take advantage of cheaper financing to invest in affordable housing projects — but only if demand signals and government incentives align," he said.
On the flip side, Najib said the affordable housing issue could worsen if the rate is increased, as it could raise borrowing costs for both developers and homebuyers, reducing affordability across all price segments.
Compounding this, he stated that the external pressures, such as trade wars and global economic uncertainties, could push Bank Negara toward a more accommodative policy stance to protect the country's economy.
He said such a move would aim to stimulate domestic demand and safeguard sectors like property from external shocks.
While the OPR plays a crucial role in shaping financing conditions, Najib said it is not a silver bullet for Malaysia's affordable housing issue.
"Addressing that challenge requires a combination of monetary policy, targeted government programmes, regulatory incentives and private sector commitment to deliver housing that meets the needs of the underserved population.
"Regardless of the OPR outcome, stakeholders must stay attuned not only to interest rate movements but also to the broader structural issues in the housing market that affect long-term affordability and accessibility," he added.
Juwai IQI co-founder and group chief executive officer Kashif Ansari said an interest rate hike could discourage new development activity, while a steady or lower rate would support both supply planning and homebuyer affordability.
He also noted that a single change to the rate may not shift the property market overnight but it offers a clear signal of the central bank's policy direction.
"If the rate holds or drops, it's a green light for continued confidence. It suggests inflation is under control and growth is still a priority," he said.
Amid rising global economic uncertainty fuelled by escalating US-driven trade tensions, Ansari said it is not yet the right time to cut the OPR.
"The threats of tariffs and trade wars are still just that — threats. Bank Negara's policy decisions are grounded in empirical data rather than media headlines," he added.
Right now, Malaysia has stable growth, manageable inflation, and steady employment. There's no urgent need to cut."
Ansari noted that the country currently enjoys stable economic growth, manageable inflation and steady employment, indicating there is no urgent need to cut the interest rate.
However, he said that change could come later this year if warranted by conditions such as slowing economic growth or a rising unemployment rate.
Meanwhile, CCO & Associates (KL) Sdn Bhd executive director Chan Wai Seen emphasised the urgent need for Malaysia to bolster domestic consumption in light of growing global trade uncertainties driven by US tariffs.
He suggested that a reduction in the rate could be a timely and effective measure to stimulate the economy, noting that the inflation rate remains at a manageable level, offering room for monetary easing.
"The reduction in the OPR will positively benefit the economy, including the property market. The loan monthly loan instalments will reduce, allowing surplus cash to be injected into the market. This augurs well for the retail as well as the hospitality sectors.
"Lower monthly loan instalments will improve the loan eligibility of the prospective buyers. This will increase the demand for properties in the primary or the secondary property market," Chan said.
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