KUALA LUMPUR: Moody’s Investors Service expects demand for residential property to slow further this year, crimped by property cooling measures imposed in 2013 and weak buyer sentiment.

“We expect the anticipation of higher mortgage rates in 2015 and the implementation of a 6% goods and services tax (GST) in April to dampen sales in 2015 as buyers take a wait-and-see approach,” said Moody’s assistant vice-president and analyst Jacintha Poh in a report yesterday.

She added that the magnitude of the sales impact will depend on the target segment of project launches and pricing by Malaysian property developers.

“We expect developers focused on residential projects located in popular cities such as Johor, Kuala Lumpur, Selangor and Penang, to face the greatest challenge in achieving sales targets as properties in these cities are typically priced above RM1 million and are aimed at high-income households or foreign investors,” she said.

As for property prices, Poh noted that growth in these popular cities has been falling since end-2013, reflecting the impact of the cooling measures.

“Nonetheless, we expect demand for owner-occupied homes priced in the middle-income range to remain resilient,” she said.

The cooling measures were introduced in October 2013 to curb speculative demand in the residential property space.

“While we do not expect the GST to deter buyers from making a purchase decision, affordability may be a concern,” Poh said. “Malaysia’s average home prices from 2001 to 2013 had increased at a compound annual growth rate of 7.3%, faster than gross national income per labourer at 6.3%.”

The country’s five largest listed property developers by revenue — Mah Sing Group Bhd, S P Setia Bhd, UEM Sunrise Bhd, Sunway Group Bhd and IJM Bhd — will see a slowdown in sales volumes, but the impact will be mitigated by their projects targeted at the middle-income segment, as well as contributions from overseas projects.

This article first appeared in The Edge Financial Daily, on February 5, 2015.