KUCHING: Lower interest rates offer little comfort to a cautious property market grappling with falling demand and rising costs, says Datuk Sim Kiang Chiok.
The Sarawak Housing and Real Estate Developers’ Association (SHEDA) Kuching Branch chairman said Bank Negara Malaysia’s (BNM) decision to reduce the Overnight Policy Rate (OPR) is a strategic, pre-emptive step to support domestic demand in the face of rising global and local uncertainties.
“While Malaysia’s economy continues to grow, there are clear signs of softening in certain sectors, particularly property.
“According to the JPPH report, total property transactions dropped by 6.2 per cent and value fell by 8.9 per cent in Q1 2025,” he told Sarawak Tribune.
He pointed to external pressures such as the recent increase in US tariffs on Malaysian exports, from 24 to 25 per cent, the weakening ringgit, and the rising cost of living due to the expanded Sales and Service Tax (SST) and the impending targeted RON95 fuel subsidy in Q4.
“The rate cut aims to preserve domestic consumption and support business sentiment. It is not a stimulus, but a timely cushion against downside risks.”
Asked if the OPR cut would lead to more home buying among Sarawakians, particularly first-time buyers, he said the effect may be limited.
“While a lower OPR may marginally reduce borrowing costs, its impact may be dampened by broader affordability challenges.
“The Q1 2025 report indicates that even though construction and new launches remain active, residential property transactions also declined in volume and in value, pointing to a cautious buyer landscape.”
He added that household incomes in Sarawak are generally more modest and sensitive to inflation.
“The combined effect of higher SST, weaker ringgit, and rising living costs could offset the benefit of lower interest rates.
“So, we may not see an immediate surge in first-time home buying unless additional supportive measures are introduced, such as reviving the Federal Government’s initiative ‘My First Home Deposit’ and other incentives such as stamp duty exemptions for all residential property transactions.”
Sim noted that Sarawak buyers are generally price-sensitive and financially conservative.
“While interest rates do matter, income stability, employment security, and inflation expectations weigh more heavily on purchasing decisions.
“Given the recent dip in transaction activity, it’s clear that sentiment is influenced more by broader economic uncertainty than interest rate changes alone.”
On current buyer sentiment, he described it as mixed to cautious.
“After seven quarters of steady growth, the market experienced a correction in Q1 2025, as shown by the decline in transaction volume and value.”
He said the OPR cut may offer short-term psychological and financial relief, but confidence remains restrained.
“Consumer confidence remains tempered by uncertainty surrounding global trade, weak currency, and upcoming subsidy reforms.
“Therefore, while the rate cut helps support sentiment, more holistic interventions are needed to sustain demand, particularly in the residential market.”
He added that developers are unlikely to reduce prices significantly.
“Input costs remain elevated due to SST expansion, higher logistics and compliance costs, and imported material price volatility.
“However, some developers may adjust by offering innovative financing packages, down payment assistance, or interest absorption schemes to stimulate buyer interest.”
Therefore, he expected that developers would lean toward more affordable options.
“There may be a strategic shift towards smaller units and affordable housing, aligning with strong demand in the sub-RM300,000 segment, which made up over half of residential sales in Q1 2025.
“Still, sustained improvement in buyer uptake will depend on macroeconomic stability and targeted incentives.”
At a broader level, Sim said the OPR reduction benefits those with loans but could come at a cost to savers.
“The lowering of interest rates is generally positive for cost-of-living relief, especially for those with housing, personal, or business loans.
“It eases monthly repayment burdens and could free up disposable income at a time when households are grappling with rising expenses due to SST and subsidy rationalisation.
“For businesses, it helps reduce financing costs and preserve cash flow in a slower growth environment.”
However, he stated that not everyone would benefit equally.
“Savers, particularly retirees or individuals dependent on interest income, will see lower returns on fixed deposits and savings accounts.
“As such, while borrowers benefit, those relying on passive income from savings may feel financially strained.”
Having said that, Sim said that the interest rate cut is welcome, but more is needed to revive housing demand.
“Structural challenges, ranging from income constraints to rising costs, must be addressed in tandem to restore strong, broad-based housing demand.”
