Moody's expects decline in property prices due to supply overhang

KUALA LUMPUR: Moody's Investors Service expects a material decline in property prices in Malaysia in the event of a protracted period of supply overhang as market valuation adjusts.

In its credit outlook issued on Monday, it pointed out that in such a scenario, the quality of housing loans with high loan-to-value (LTV) ratios are most at risk.

“We understand from our rated banks in Malaysia that 20%-30% of mortgages booked each year have LTV ratios of 90% or higher at the time of origination.

“Furthermore, we believe that suspending new property development will not correct the oversupply situation over the next five years, when property projects now in development enter the market,” it said.

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