Whither Interest Rates?

Malaysia’s CPI increased for the fifth consecutive month in August, coming at 4.7% year on year (y-o-y), compared with an increase of 4.4% in July. Will there be a 4th rate hike in November ?

Bank Negara Malaysia had signalled in its September monetary policy statement that they are not on a preset path to raise rates continuously, and there was therefore room for an intermittent pause. But there is a fly in the ointment in this argument- core inflation in Bolehland continues to increase and reached a new peak of 3.8% y-o-y in August, amid strengthening domestic demand.

On a month-on-month (m-o-m) basis, core price inflation still recorded a positive growth of 0.6% to 3.8% in August. Notably food inflation was up to 7.2%. I think BNM needs to step up the increase in interest rates, never mind the political pressure put on it because of upcoming General Elections. Otherwise the Ringgit's depreciation against the USD and SGD will continue on its download trajectory.

The Fed has signalled it intends to continue tightening interest rates to fight inflation. That's bad news for countries like Bolehland and the UK whose currencies have been weakening to their lowest points in recent years. More pain lies ahead for the high end property market which is dependent on foreign buyers.( It's a hard slog to market multi million RM depreciating assets to foreign buyers, even if on a PSF basis KL properties are probably the cheapest in Asia Pacific.)

Recent auctions of 5* luxury condominiums in KL are still seeing prices continue to decline. A 3000+ SF unit at Dedaun is going for its 6th auction at RM570 PSF. That's well below its launch price of around RM1000 PSF in 2013. See PropertyGuru's Pricing Insights chart below.

#realestate #klcc #luxuryhomes #malaysianCPI

Dedaun 3 bedroom unit transactions prices in PSF

Source : PropertyGuru's Pricing Insights charts

Copyright Property Pinpoint