Malaysia's central bank, Bank Negara Malaysia (BNM), has unexpectedly increased the overnight policy rate (OPR) by 25 basis points to 3% in May 2023. BNM believes that the global economy is being driven by resilient domestic demand. This increase follows two consecutive pauses in early 2023 at 2.75%, and most economists had predicted that BNM would maintain the OPR level.

BNM's decision comes after it had raised the key rate four times last year, which increased the OPR by 100 basis points. The latest hike has raised the OPR to its pre-pandemic level seen in the second half of 2019.

According to Juwai IQI co-founder and group CEO, Kashif Ansari, the housing market is expected to remain robust despite the recent rise in the overnight policy rate (OPR) by 25 basis points to 3%. He stated that the positive trend seen in the past three quarters, with rising transaction volume and declining overhang, will continue in the second quarter. While higher rates may make purchasing and developing housing more expensive, he believes that the real estate market can absorb this increase.

Furthermore, Ansari noted that higher mortgage rates would be offset by improved household financial circumstances among many families. However, the OPR rise would increase borrowing costs for developers. Consequently, he expects the number of construction projects planned and starting over the next six months to moderate.

In 2022, construction started on 98,000 landed and high-rise residential units, with just over 89,000 units in the pipeline for future construction by the end of the year. According to Kashif, Bank Negara is determined to balance growth and inflation while reining in inflation and easing the economy into a soft landing. He believes that growth prospects are resilient and will support the housing market despite the latest rate rise. Overall, the housing market is expected to remain strong with moderate price increases and growing demand.