The country's Bank Negara has indicated that it wants to increase rates to curb rising inflation.
Low interest rates over the last five years have made housing loans particularly attractive and led to a massive growth in the number of people investing in property, according to KPMG partner Ooi Kok Seng.
But a move upward will make the property market in the country no longer sustainable, he fears. 'Any adjustment in the interest rates by Bank Negara to curb inflation may negatively impact the property market as there would be forced selling of properties,' he said.
Dr Lim Mah Hui, a senior fellow attached to the Asian Public Intellectual fellowship, said he is also concerned about what is happening within the financial sector and its impact on the property market.
'The factors preceding a banking and financial crisis usually involve too much money flowing into the system either from foreign investors or due to the central bank's policy of being too loose. It has happened in the past and it's happening today. The cost of cleaning up a banking crisis is enormous. Developers should not just build and build to make more money,' he warned.
To avoid a property market crisis developers ought to be looking at the luxury market and aim at foreign investors seeking second homes, according to Datuk Faudzi Naim, chairman of the Joint Business Council Malaysia.
'There are foreign investors who are interested in Penang due to its positioning as a hub for education and medical services. Foreign house buyers want quality and they want professional management services to look after their investments when they are away,' he said.
He also called on the Government to beef up the local security situation, and improve on the hygiene and traffic conditions. Faudzi also said the state government should stop making developers build affordable housing as this inevitably leads to the high selling prices of the properties in the non-affordable category.
