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Developers rush to beat rates hike
13/04/2005 The Malay Mail

PROPERTY developers are rushing to launch new housing projects and townships, ahead of an expected rise in interest rates, which they say in the short term may crimp demand.

"Prices will be affected if there is an increase in interest rates," said Selangor Properties Bhd's financial controller Lee Boon Kian in a telephone interview.

Interest rates, now at a record low of about 2.7 per cent, might be raised in the second half of the year if the inflation rate grows above the 2.7 per cent level, analysts say.

The country's February inflation rate was 2.4 per cent, the same as in January, but an expected increase in prices of bread, taxi and bus fares by as early as next month, may help push inflation higher, analysts say.

Malaysia, aided by low inflation, has kept interest rates at record lows since the Asian financial crisis to help fuel economic growth.

The policy had helped the country's economy grow in 2004 at its fastest pace in four years, but growth is expected to slow down to five per cent this year, partly due to high oil prices, which is also increasing inflationary pressure.

According to Lee, a higher interest rate is a major concern for property developers, and as such developers may opt to launch new housing projects at faster pace, and lock up buyers, before any increase in interest rates.

"It is better for developers to start launching the projects now rather than wait," said Lee.

Mutiara Goodyear Development Bhd's general manager, Edmond Low, also said that a spike in interest rates may in the short term affect demand for properties.

"It is just a cycle that we have to go through sooner or later," said Low. He added that demand for properties is also closely tied up with the performance of the stock market.

"To a certain extent, an increase in interest rates will affect prices but at the same time, the reputation of the developer, location and quality of houses will also play a role. Most people who are looking at investing in property will still buy, knowing that the price will double in years to come," said Low.

 

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