KUALA LUMPUR: Malaysia and several other economies in the Asia-Pacific region are considered to be at moderate risk regarding commercial real estate (CRE) loans, according to Moody's Ratings,

The company has observed a rising trend in risk associated with CRE loans issued by local banks.

According to their recent report, CRE exposures currently make up about 12 per cent of total loans for banks in the Asia-Pacific region, with varying levels of risk observed across different economies.  

In Malaysia, specifically, CRE exposures account for approximately 10 per cent of total loans.

This categorisation places Malaysia alongside other economies in the region with similar risk profiles, including Indonesia (19.2 per cent), Korea (13.9 per cent, and Thailand (9.6 per cent).

These countries are identified as having moderate levels of exposure to CRE loans, which necessitates careful monitoring amid evolving market dynamics.

In contrast, economies like Hong Kong (22.3 per cent) and Vietnam (14.3 per cent) exhibit higher exposure levels, signaling potentially greater vulnerability to CRE-related asset risks.  

Conversely, Singapore (28.2 per cent) and Japan (17.1 per cent) demonstrate lower exposure rates, indicative of comparatively lower risks in their CRE lending portfolios.

The report also emphasised the importance of asset risk buffers, such as capitalisation levels, loan-loss reserves, and collateral coverage, in mitigating potential unexpected asset risks arising from CRE loans.

Moody's underscored the significance of the operating environment, encompassing macroeconomic and microeconomic factors that can significantly influence the performance and stability of banks.

Factors affecting CRE-related asset risks include the performance of CRE loans and Moody's outlook on CRE-related asset quality. 

Additionally, the health of the real estate market, including sales volumes, price fluctuations, and occupancy rates, is identified as pivotal in determining the overall risk landscape for CRE lending institutions.

https://www.nst.com.my/business/corporate/2024/06/1064898/asia-pacifics-cre-loan-risk-levels