Cooling in Malaysia’s residential property market? Is it likely?

A report from Spy Ghana enumerates the following trends in the country’s residential real estate sector when it comes to household debt:

– Residential property prices have increased by 60% since 2008 according to IMF

– According to McKinsey Global Institute, the household-debt-to-income ratio reached 146% at the end of 2014 from 139% in 2007. Home loans made up the largest share of Malaysia’s household debt, accounting for 45.7% of the total.

– IMF notes that notes that 70% of all home loans as of March had been taken out with variable-rate mortgages, meaning repayment levels could rise in certain economic conditions.

– Home loans are now falling, with more applications being rejected by the banks: loan rejections over sales rose by 7% from 2013 to 2014, according to the Real Estate and Housing Developers’ Association Malaysia (Redha).

Regulatory measures aimed at cooling the market will play a part in driving down demand. In 2013, Bank Negara Malaysia capped mortgage terms at a maximum of 35 years and personal loans at 10 years, while also limiting pre-approved housing loans by developers.

Real estate is a cycle of ups and downs. The photo shown contains historical data. The question remains: are we approaching a downturn?