Is a property bubble forming?

There has been some concern in recent months over an imminent real estate bubble in Malaysia. How real is this threat or is it merely confi ned to a few hot spots?

Concerns over whether the local housing market is overheating and will lead to an asset bubble are raising questions on whether there is a need for more tightening measures to curb speculative buying and ensure the market stays sustainable.

The local housing market has not “hit the roof” like in some places in the region such as in Hong Kong, Shanghai and Singapore which have recorded sharp price jumps of 40% to 60% since last year.

Nevertheless, prices of landed houses in some popular areas in the Klang Valley, Penang and Johor have appreciated by 10% to 30% over the past six to eight months. Bank Negara is keeping a close watch on the mortgage loan market and is engaging with bankers on whether tightening measures such as capping the loan-to-value ratio (LVR) at 80% should be introduced. It will be unlikely that the central bank will impose the mortgage loan limit across the board but the measure will most likely be targeted at the critical sectors, such as the upper medium to high-end landed residential sector and non-owner occupied houses.

Purchasers who own multiple properties may also be subject to the new loan limit if it is implemented.

The RPGT factor

Industry observers say another measure at the Government’s disposal is raising the quantum of real property gains tax (RPGT), which is currently at 5% for all property sold within the first five years of purchase.

The Government has tweaked the RPGT on various occasions depending on market conditions.

From April 2007 until it was reintroduced in January this year, all gains from property transactions have been exempted from the tax. The exemption was granted as a support measure to reverse the flagging property sales during the market downturn.

Under Budget 2010, the RPGT was brought back in January, albeit at 5% for all property sold within the first five years of purchase.

If the Government decides to reintroduce the RPGT in its entirety, property speculators will get the brunt of the “axe” as gains from property sales within the first five years of purchase will be subjected to a tax of 5% to 30%.

The maximum 30% is for disposal within the first two years; 20% within the third year; 15% within the fourth year and 5% within the fifth year. Profits earned from disposal in the sixth year and beyond will not be taxed.

How far the Government will go on tightening the noose on mortgage loans and the RPGT is still left to be seen. But some changes can be expected in the horizon if price increases become more prevalent and broad-based.

Consumer and industry groups are concerned that if the tightening measures are introduced, they will impact the affordability of property buyers and market sentiment.

Usually if a market is flushed with speculative buying and a bubble is imminent, property prices will spike sharply across the board of a certain market within a short time like what is happening in a number of countries in the region today.

A case in point – a 26-year-old government-built apartment of 420 sq ft in the Sham Shui Po area of Kowloon district was transacted at HK$1.98mil, or HK$4,714 per sq ft.

Fuelled by high liquidity and record low mortgage rates, Hong Kong, China and Singapore have implemented tightening measures to clamp down on property speculators as risk heightens that the sharp escalation of property prices will result in a market collapse if the bubble burst.

Reason for concern?

Is Malaysia facing a similar risk and is there worry of an imminent overheating or bubble?

Real Estate and Housing Developers’ Association (Rehda) president Datuk Michael Yam discounts the possibility of overheating or an asset bubble in the local market.


“We believe the steep price increases are only reported in scattered locations in the Kuala Lumpur City Centre and some landed housing projects in the Greater Kuala Lumpur area. This does not represent a bubble but more of a short-term deviation from fundamentals that are due to isolated speculative activities in some areas.

“Generally, the local property industry is chugging along at an even keel. We believe that prices are already peaking, and we are neither hot nor cold. The recent spurt in prices may be due to the effect of the earlier stimulus package and liquidity but that has stabilised and a plateau has been formed,” he relates to StarBizWeek.

Yam says that unless there are government incentives, there is generally no excitement or broad-based stimulation in property activities. For an increase in activities, the impact of the Economic Transformation Programme, Government Transformation Programme and the NKEAs and even Malaysia Property Incorporated as major catalysts has to come in.


“Landed terrace and semi-detached houses have seen big capital appreciation due to the limited stock available and future supply especially in prime locations. As a consequence, prices of current stock in strategic areas of Medan Damansara, Bangsar, Sri Hartamas, Bandar Utama and even new launches at Desa Park City are at or above the RM1mil mark for a double or 3-storey terrace house.

“However, one must appreciate that the price a house commands (other than its location) is dependent on its built-up, specifications, value added renovation and unique features not normally available in a standard offering,” he points out.

Tackling structural issues

Yam says the industry and the Government need to accelerate supply and also review the causes and hurdles that either impede or slow down the delivery process. Areas that need to be examined include the cost of doing business and the efficiency and subsidies that affect delivery to avoid overheating due to pent-up demand.

He disagrees with new tightening measures. “As it is, the market is not exactly buoyant and is only driven predominantly by owner occupiers. Any additional regulations such as higher RPGT, capping loan amounts and imposing higher deposits, or increasing the cost of housing delivery such as making the build-then-sell system compulsory would be a disincentive to the industry,” he stresses.

Malaysia Property Inc chief executive officer Kumar Tharmalingam says the issue of a bubble is being overblown.


“A single swallow does not make a summer. There may be certain projects fetching premium values or prices for their products, but it is not representative of the overall market.

“Our data shows values are rising in the Klang Valley but they are within specific locations and projects sought by a special brand of investors who want exclusivity. The strong buying interest is not across the board but is mainly centred in the high growth markets of the Klang Valley, Penang and Johor,” he adds.

Kumar says concerns that the potential slowdown in the West will affect the local market are also overrated.

“Our banks are strong and have not buckled even during the global financial crisis in 2007/8. We have systems in banks that keep on fine-tuning the loan to equity ratio depending on the earning capacity of the borrower. Bank Negara is watching the situation and will call in loan to value ratios to change if the situation warrants.

“Our property purchase system from a primary developer is probably the most seamless in Asia. All the necessary checks and balances are built into place by the developers, bankers and solicitors to make sure that the developers have the right purchaser who has the necessary finances and affordability to purchase the property,” he says.

An imminent uptrend?

Meanwhile, developers are monitoring the sale of their products daily and any signs of weakness in the market will be felt by them “since they stand to lose the most if the buyer pays a deposit and walks away from the purchase later,” Kumar adds.

According to Mah Sing Group Bhd group managing director and chief executive Tan Sri Leong Hoy Kum, the property market is still in the early to mid-phase of an upcycle.

“We do not see a strong risk of a property bubble happening yet and there is no sign of overheating. The price increase in properties has not been broad-based, but demand driven and rather selectively in prime locations.”

Leong says certain locations and types of products are more resilient in terms of demand, capital appreciation and value preservation.

“A healthy property market is good for the economy and quality properties in prime locations are deemed to provide a good hedge against inflation. Barring any external shocks, we are cautiously optimistic that the property market should continue to do well in the short and medium term,” Leong says.

Kumar concurs with Yam that the Government’s stimulus packages are only filtering into the system now and are creating greater confidence and interest in the property market.

“There are not enough viable investment instruments around and that’s why investors are rushing to buy property. Generally, our financial market still lacks depth such as good financial planners and advisors on investment opportunities. There is still a preference for solid and secure investment instruments like property,” he adds.

Kumar says developers will slow down on their launches as they do not want a property overhang of unsold units.

“Over the next few years we are going to see smaller launches in the Klang Valley as our property market consolidates and developers are going to release property in batches to test the market.

“Developers are venturing into niche products with better quality finishings and designs, as buyers want the least fuss these days. This has driven developers to go into higher value residences,” he concludes. - By Angie Ng (The Star)

31 comments:

September 18, 2010 at 11:04 PMtan

Why is malaysia's bank negara so slow to act ?

Is bank negara still "engaging with these industry players ..developers, real estate agents....." ??

What kind of altruistic feedbacks does bank negara expect from these groups of people with vested interest ... they are the biggest speculators themselves, repeatedly manipulating and hiking up the prices ....

as expected these greedy and unscrupulous "industry players" will voice their opposition to any moves to curb speculations and escalating prices
and they are now deceivingly changing their tune .....
just recently they were boasting the property market is " simmering and people should start buying as prices will rise 30 percent within the next six months" !!

now they try to mislead, using words like "market will dive or plunge" or "this planet will stop turning" if you let them ....(insulting our intelligence)

no suprise after all ... Birds of a feather flock together for these people

Bank negara need to act fast .... without fear or favour

 
September 18, 2010 at 11:32 PMNg

The writing is on the wall .....

but our Bank Negara is BLIND !!!

bad news for the ordinary people but good news for the greedy speculators, developers,agents .... can continue laughing all the way to the bank

 
September 19, 2010 at 9:26 AMAngeline

I think property speculation is only rift in certain areas of the country. We don't see this happening in Kelantan, Terengganu, Pahang, Perak, or even Negeri Sembilan. Properties there are rather depressed, so it is not untrue that Malaysia will not have 'boom-and-bust' situation like S'pore, HK or China. However, the same CANNOT be said of Penang island or Klang Valley. I will write based on Penang (as I come from there).

If a house that was sold in early 2009 at 500K is not being put into the market for 750-800K, approximately > 40% increase, in about one year, if not called speculation, what is?! and almost ridiculous - and that is what is happening in Penang island. Another case in point is that a high end condo of 150 units now has 134 units in the secondhand market! Definitely not owners.

Penang island is now only for speculators and investors. GENUINE house-owners are now held to ransom by these people by over-inflating house prices. This high levels of property speculation in Penang is encouraged by low bank interest, and a certain 'blind eye' by government agencies to the plight of genuine home owners in Penang island. Penang island is like one big casino right now - buy now, 6 months later, sell for 40% increase! And where do the ordinary, or newly employed, or civil servants stand? they do live and work on the island too.

I think Bank Negara and the government should seriously study what is happening - property should meet GENUINE housing needs, sure - rise in prices by all means, in line with inflation (we do need a measure of inflation to grow) - but at >40% in a year??

Help the genuine home owners own their home - don't let them be pushed to the periphery in their own state to speculators and investors, or as some speculators will say - 'buy in mainland if you cannot' - is that right? AngelineC.

 
September 19, 2010 at 9:29 AMAngeline

Sorry - some typo errors, corrected here:

I think property speculation is only rift in certain areas of the country. We don't see this happening in Kelantan, Terengganu, Pahang, Perak, or even Negeri Sembilan. Properties there are rather depressed, so it is not untrue that Malaysia will not have 'boom-and-bust' situation like S'pore, HK or China. However, the same CANNOT be said of Penang island or Klang Valley. I will write based on Penang (as I come from there).

If a house/condo that was sold in early 2009 at approx. 500-600K is NOW being put into the market for 750-800K, approximately > 40% increase, in about one year, if not called speculation, what is?! and almost ridiculous - and that is what is happening in Penang island. Another case in point is that a high end condo of 150 units now has 134 units in the secondhand market! Definitely not owners.

Penang island is now only for speculators and investors. GENUINE house-owners are now held to ransom by these people by over-inflating house prices. This high levels of property speculation in Penang is encouraged by low bank interest, and a certain 'blind eye' by government agencies to the plight of genuine home owners in Penang island. Penang island is like one big casino right now - buy now, 6 months later, sell for 40% increase! And where do the ordinary, or newly employed, or civil servants stand? they do live and work on the island too.

I think Bank Negara and the government should seriously study what is happening - property should meet GENUINE housing needs, sure - rise in prices by all means, in line with inflation (we do need a measure of inflation to grow) - but at >40% in a year??

Help the genuine home owners own their home - don't let them be pushed to the periphery in their own state to speculators and investors, or as some speculators will say - 'buy in mainland if you cannot' - is that right? AngelineC.

 
September 19, 2010 at 12:33 PMjeremy tan

well said Angeline : )

The government should address these issues.

The banks should be audited for giving out loans

It is hard for the bubble to burst when the rich is monopolizing the market.

 
September 19, 2010 at 3:53 PMDaamao

Angeline,
Good one!

Those higher end property (>1million) may be dominated by foreign "investors", the medium end (300-500k) are most likely from those medium income population, either trying to put roof over their heads, or in the market trying to get few quick bucks. I will not be surprise if many of these are originally property agents, who later turn "investors" as a result of the fast money.

Newton's law says whatever goes up and not supported will eventually comes down, to a level that is supported.

Those with cash on hands can decide to join the fast money bandwagon, or DECIDE where that supported level should be.

For now, I am keep my money in my pocket.

The decision is a lot like today's political arena
1. hope that the party can continue for another 50 years
2. decide to change!

If you are good old citizen looking for simple way of living, believe in change, and looking to break from old school manipulation, let's join force to realize a property tsunami.

 
September 19, 2010 at 4:11 PMDaamao

I forgot to mention, history has a strange way of repeating itself.

For a peek into the history, read this
http://en.wikipedia.org/wiki/Tulip_mania

This is a game of musical chair, when the music stops, last one standing lose.

You better be prepared to stand when the music stops.

 
September 19, 2010 at 6:07 PMDaamao

or read this

http://en.wikipedia.org/wiki/Subprime_mortgage_crisis

Some detail quoted here, read especially #2,4,5, & 11, striking and scary resemblances.

The crisis can be attributed to a number of factors pervasive in both housing and credit markets, factors which emerged over a number of years. Causes proposed include

1. the inability of homeowners to make their mortgage payments, due primarily to adjustable-rate mortgages resetting,
2. borrowers overextending,
3. predatory lending,
4. speculation
5. overbuilding during the boom period
6. risky mortgage products
7. high personal and corporate debt levels
8. financial products that distributed and perhaps concealed the risk of mortgage default
9. bad monetary and housing policies
10. international trade imbalances,
11. inappropriate government regulation.

 
September 19, 2010 at 6:19 PMDaamao

http://en.wikipedia.org/wiki/Subprime_mortgage_crisis:

- Low interest rates and large inflows of foreign funds created easy credit conditions for a number of years prior to the crisis, fueling a housing market boom and encouraging debt-financed consumption.

- Between 1997 and 2006, the price of the typical American house increased by 124%.

- While housing prices were increasing, consumers were saving less and both borrowing and spending more.

- This credit and house price explosion led to a building boom and eventually to a surplus of unsold homes, which caused U.S. housing prices to peak and begin declining in mid-2006.

- Easy credit, and a belief that house prices would continue to appreciate, had encouraged many subprime borrowers to obtain adjustable-rate mortgages.

- By September 2008, average U.S. housing prices had declined by over 20% from their mid-2006 peak.This major and unexpected decline in house prices means that many borrowers have zero or negative equity in their homes, meaning their homes were worth less than their mortgages.

- As of March 2008, an estimated 8.8 million borrowers — 10.8% of all homeowners — had negative equity in their homes, a number that is believed to have risen to 12 million by November 2008.

- By January 2008, the inventory of unsold new homes was 9.8 times the December 2007 sales volume.

This overhang of unsold homes lowered house prices. As prices declined, more homeowners were at risk of default or foreclosure. House prices are expected to continue declining until this inventory of unsold homes (an instance of excess supply) declines to normal levels.

- Speculative borrowing in residential real estate has been cited as a contributing factor to the subprime mortgage crisis.

- Speculative borrowing in residential real estate has been cited as a contributing factor to the subprime mortgage crisis. A record level of nearly 40% of homes purchases were not intended as primary residences.

- Housing prices nearly doubled between 2000 and 2006, a vastly different trend from the historical appreciation at roughly the rate of inflation.

- Media widely reported condominiums being purchased while under construction, then being "flipped" (sold) for a profit without the seller ever having lived in them.

- In the years before the crisis, the behavior of lenders changed dramatically. Lenders offered more and more loans to higher-risk borrowers.

- Both government failed regulation and deregulation contributed to the crisis.

- A contributing factor to the rise in house prices was the Federal Reserve's lowering of interest rates early in the decade.

- Many financial institutions, investment banks in particular, issued large amounts of debt during 2004–2007.

 
September 19, 2010 at 8:48 PMDaamao

These are the info that the lending institution does not want you to know.

If all else fail, how bad can it get? the mess is too big to fail.

If uncle SAM, the grandmama of capitalism, has to resort to bailing out all the greedy SOB bankers, the new axis of evil, during subprime crisis, how worse can it get right?!

After all, our beloved government is the grandmama of bailing out failed corporation!

The question is, after all the havoc subsided, "where will you be?"

 
September 19, 2010 at 11:34 PMKS

Looks like the ordinary people are treated like fools ....

It is always the rich and privileged taking advantage of the weak and poor

when it comes to providing a roof over our heads, we are held to ransom by these greedy "industry players" who dictate and inflate the prices to ridiculous levels !
Overly excessive speculations have been pushing up the prices fast beyond the reach of genuine buyers .....

and our dear Big Mama at bank negara seems to be taking donkey's years to act !

 
September 20, 2010 at 5:49 AMPenang Fan
This comment has been removed by the author. 
September 20, 2010 at 5:51 AMPenang Fan

Big Mama at bank negara is still sleeping with all the developers. Until the day she get pregnant and couldn't find who the father is she will then wake up. But it may be to late for an abortion. Wake up Malaysia. You don't want to simulate U.S.A. economy nightmare.

Speculators who paid 10% will just walk away when prices drop and Banks will be left carrying worthless properties. Can Malaysia afford to bail these greedy banker? I don't think so. U.S. the world biggest economy can but we are only "Kachang Puteh". Mati- lah.

 
September 20, 2010 at 1:49 PMDD

Can "speculators" just walk away from responsibility of repaying the loan when the price drop, in Malaysia? I doubt so. I am sure banks will take all legal actions possible to recover the money, including bringing loan defaulters into bankruptcy. US subprime crisis was much more complex situation than what we have in Malaysia. It was triggered by subprime lending and adjustable rate mortgages which the interest rate can yo-yo like stock market unlike regulated BLR by bank negara. Quote "Proponents of subprime lending maintain that the practice extends credit to people who would otherwise not have access to the credit market." Loan and banking system in Malaysia is much more regulated and controlled than in US. Of course that does not mean that we should feel "safe". But balance must be maintain to make sure property industry has healthy development. If Malaysian property market and system is not attractive enough, end of the day even wealthy malaysians will shy away from investing in malaysia. Good example, UK developers managed to attract wealthy Malaysian to invest in multi million property in London. http://www.starproperty.my/PropertyScene/TheStarOnlineHighlightBox/7118/0/0

 
September 20, 2010 at 3:37 PMYap

House prices are spiralling out of control beyond the reach of the ordinary people.
Greedy speculators are having a field day making a 'killing' at the expense of the poor genuine buyers.

and what is the government & central bank doing ? Nothing !!

Is this what the authority mean by " Government of the people, by the people and for the people"

What a load of bullshit !

 
September 20, 2010 at 4:11 PMchan

Dear Big Mama at bank negara ....Your Silence is NOT golden !

It's time to come down from your ivory tower and get cracking !

The people's patience is wearing thin .....

 
September 21, 2010 at 12:46 PMDaamao

DD
Yes the property market need to be attractive to foreign investment, but it should also be affordable to the general public. This is the very basic necessity of our society.

An engineer who is earning 5k/month (60k per annum, > 2X of Malaysia per capita GDP) should be able to afford a very basic 1300sf condo on Penang Island.

At today's rate, the poor guy will have to fork our 2k/month (350k loan, 30 years repayment, 6% interest), close to 50% of his take home pay to be able to afford a decent home.

I don’t see the government is doing enough to make this happen. In fact, as a citizen, I get impression that the government is afraid to do anything, because of "special interests" or hoping everything will take care by itself.

So, what do you call a government that is not governing?

Governless? 

 
September 21, 2010 at 3:33 PMDaamao

More interesting data, comparison of GDP per capita over time as a gauge of our well being:

1.Between 1970-2009,

a.In 1970, Singapore GDP per capita is 3.7x of Malaysia, that gap has widened to 4.7x. Similar observation is seen on other “High incoming nations”, i.e. Korea (1.9x to 3.2x!!!), HK (3.9x to 4.7x), Taiwan (1.6x to 2.7x).

b. Comparing with poorer neighbors, we did not fair too badly. Malaysia GDP was 4.1x of Indonesia, 2.1x of Thailand, it is still holding steady at 4.1x & 2.0x respectively. Meaning, our chances of becoming a high incoming nation is as good as Indonesia or Thailand.

c. One interesting observation is Philippine. In 1970 Malaysia GDP is 1.7x of Philippine. Today, the gap has widened to 4.8x. This gives you the grim picture of what poor governance and corruption does to rotten a country, something for us to learn.

2. Looking into nearer past, between 2000 – 2009,

a. Comparing with high income nation, the gap stayed. Singapore GDP was 5x of Malaysia, in 2009, it narrowed to 4.7x. So, the good news is, we are running as fast as the high income nation. Bad news is we are still very far behind and not getting closer.

b. Comparing with poorer neighbors, we are holding steady as well. In 2000, Malaysia GDP is 4.5x of Indonesia, the gap narrowed slightly to 4.1x in 2009 (not good). Holding steady with Philippine at 4.8x (not good). Holding steady with Thailand at 2.1x (not too bad la..), but gap with Vietnam has narrowed from 10.8x to 7.7x.

c. The conclusion from item 2 above means, our chance of becoming high income nation is as good as Philippine (!!!) and Thailand, and but not as good as Vietnam (!!!) given the growth rate.

3. Comparison with the new economy superpower, China

a.In 1970, Malaysia GDP per capita was 8.9x of China, that gap narrowed to 4.3x in 2010, and only 2.4x in 2009. Bear in mind, we are also comparing ourselves with the fellas in QingHai, XingJiang, Tibet, etc, who earns a few cow dung a day.

The conclusion we can draw from the data:

a. taking Singapore as a benchmark, when we become high income nation in 2020, our children who graduated from University will start with a pay of 11.7k, compared with current 2.5k.

b. Indonesia and Philippine will stop exporting cheap labors, because they have equal chance to become rich nation like Malaysia.

c. China will become a superpower someday, but we have a lot, I mean a great big lot, of hard work to do.

d. From financial standpoint, it is not too shabby to actually “go back to China”!

 
September 21, 2010 at 5:58 PMDaamao

Sorry, i want to make a clarification regarding comparison between Malaysia and Philippine.

From 1970 to 2000, GDP per capita between Malaysia and Philippine widen from 1.7x to 4.8x.
1970 = 1.7x
1980 = 2.1x
1990 = 3.2x
2000 = 4.8x

Remarkable result from the 2M combination: Marcos and Dr. Mahathir (whether you like him or not, the result speaks).

Here’s the bad news:

2001 = 4.7x
2002 = 4.7x
2003 = 4.8x
2004 = 4.9x
2005 = 4.9x
2006 = 4.9x
2007 = 4.9x
2008 = 4.9x
2009 = 4.8x

Which coincide with what I heard from a friend not too long ago.

Unless we reverse the trend, Malaysia, a net importer of maids today, may soon become a net exporter of maids not long from now.

My only hope is the forex that our children bring home will support property growth at the rate today.

Cheers.

 
September 21, 2010 at 6:58 PMDaamao

http://malaysia-today.net/mtcolumns/letterssurat/34664-then-and-now-life-gets-harder-in-malaysia

If I have read this article first, I would not bother to post those that came before.

Anyway, the figures are still consistent, and my heart sank further when reading the closing:

"As real income continue to decline in the face of stagnated wages and increasing inflation the standard of living will keep going down. What happens next is predictable. If our graduates cannot make a decent living here they will go overseas to look for work. Following their heels will be masses of Malaysians looking for work as maids, waiters and unskilled labourers. We will become a maid and labour exporting country like Philippines and Indonesia."

Better get some beer to drown myself for now.

Cheers!

 
September 21, 2010 at 9:11 PMNgoh

5 years ago a fresh grad engineer's pay is around 2 - 2.5k, that time a decent condo (not bother to mention about landed) in penang is around 200-300k. Today 2010 an engineer fresh grad's salary is still 2 - 2.5k (or a merely 2.5 - 2.8k if your are lucky enough), but how much for a decent condo? 300-500k? So our leaders call it "we are moving towards a HIGH INCOME NATION"??

I only see we are rolling backwards....at a very face pace

 
September 21, 2010 at 9:49 PMalan

If the buyers are able to hold back buying from subsale market for another 1-2 years, then the price of a lot of new condo will go down (ie. Birch Plaza, Spring, I Regency, DPiazza, Vista Gambier, Brezza, Surin, Summer Place and many more to come)

 
September 21, 2010 at 10:29 PMDaamao

http://www.themalaysianinsider.com/malaysia/article/najib-says-no-mortgage-cap-for-genuine-home-buyers/

"Najib says no mortgage cap for genuine home buyers."

Is there a better way to say the obvious?

I would say

1. No cap for 1st & 2nd house buyer
2. 70% cap for 3rd house onwards
3. 30% capital gain tax for sale within 5 years after OC
4. #3 should have a grace period of 1 year, and be implemented by 21Dec2011, so all speculative inventory can be off lead at reasonable price to be determined by the market demand.

There.

Thanks for making me look smart. Maybe I should run for Prime Minister.

 
September 22, 2010 at 7:05 AMjeremy tan

Prime Minister Datuk Seri Najib Razak said after discussing with Bank Negara Malaysia, the government found no reason why it should limit end-financing across the board for residential properties.

Speaking to reporters at Bank Negara yesterday, Najib said the central bank may impose a limit on financing for subsequent purchases after the second property.

"For the bona fide buyers, there will be no review of the limit. So, they can borrow up to 90 per cent," he added.

Reports surfaced recently that Bank Negara was talking to banks about possible measures to check excessive speculation on property prices.

One of the measures brought to the table include capping end-financing to just 80 per cent of the value of property from 90 per cent that is given out by banks now.

Analysts have said they were watching property prices closely for signs of bubble building up in the sector amid talks of excessive speculative buyings.

Developers, however, dismissed the bubble threat, with many saying banks themselves were closely monitoring the situation, including the creditworthiness of borrowers before app-roving loans.

At the end of the day, like what i have suggested earlier. Auditing the banks from time to time would be the best measure.

The market has its way of correcting itself no matter what we throw at it.

 
September 22, 2010 at 9:59 AMDaamao

"The market has its way of correcting itself no matter what we throw at it"

We can debate as if we are economist, but the sub-prime crisis certainly did not correct itself.

Capitalism is great but if not regulated the result of rich exploiting the poor will sooner or later rip the society apart.

Those that can afford 30% down and holding 5 years (or 30% gain tax) are surely welcomed to invest in 3rd house onwards. It is also a way of market correcting itself no matter what we throw at it, right?

 
September 22, 2010 at 7:06 PMjeremy tan

Dear Daomao,
The sub prime crisis did correct itself. The bubble burst, hence it has corrected its balance and level.

Capitalism is great. Greed is the problem. Capitalism basically encourages people to work hard and smart to achieve the things that they want to have.

I still think it is not healthy to implement the cap on housing loan. I prefer this outcome : it is either you deserve it or you don't. Keep the banks checked at all times.
You can't stop the consumers but you can regulate their consumerism behaviours by monitoring it.

I am with Najib's decision in not implementing the cap as this will affect real home buyers and dampen economic growth.

Audit the banks by giving them stress tests from time to time.

Cheers

 
September 23, 2010 at 10:07 AMJeff

I have read the newspaper today that PM has announced that only 80% loan margin will be given to those buyers who are buying the 3rd house. At one point, i think it is fair for those who are looking to own their first house. However, I came across that some developers can actually pump up their price in SPA to enable the purchaser to get higher loan margin. I am afriad that this 80% loan margin might not work effectively as expected.

 
September 23, 2010 at 7:33 PMDaamao

Associated Press - " French commuters squeezed onto limited trains or fought for rare parking spots Thursday as a second round of strikes against President Nicolas Sarkozy's plan to raise the retirement age to 62 hobbled trains, planes and schools across the country."

The irony is, there will be a riot in KL or Penang soon if the government does not raise the retirement age to 70. Most of the housing loan today is max out, and these ppl only clear their loan at, or close to 70 years old. And they still need to live for a long long time after that.

"It is either you deserve it or you don't"
- I like the idea. You are entitle to say this after you have worked your arse out to achieve certain level of success. But when only 10% of the population can afford to say it out loud, and the good old middle class thinks they deserve it, but they can't, what have gone wrong?

Asking the bank to behave is like asking the disco to close shop at 9pm to prevent social illness. Not going to happen. It is against their interest.

I was amused when reading "Bank Negara had reportedly written to banks to obtain feedback on the possibility of capping the LVR for mortgages at 80 per cent to prevent a potential property bubble."

I think this has taken too long, Bank Negara should just shove it down their throat, to say it politely. :-)

 
September 25, 2010 at 7:56 AMBobo

Well say, Daamao.

When only 10% of the population can afford to say it out loud, and the good old middle class thinks they deserve it, but they can't, what have gone wrong?

>>> that 10% including greedy speculators, developers, house owner that support capitalism and wish the market correcting itself. Those 10% just don't have sense of social responsibility. Capitalism is super lousy excuse when the poor has no house to stay and the rich has plenty houses to sell. Screw the so call Capitalism in Malaysia. We are in Malaysia, not HK, not Japan, not Singapore, not US, not UK, not Europe, not China.
馬來西亞不是地小人多的香港和日本,不是經濟飛騰的中國和新加坡,不是爛船也有幾噸釘的美英歐。


Below article speak the 90% group mind, but who care about them? It is damn right, this is not about whether A can buy house but B cannot, this is about social responsibility which our "beloved" government & developers and all of us need to caryy out.
小老百姓有甚麼能力購買超高價房屋?發展商和炒屋客憑甚麼抬高屋價?政府有甚麼條件無動於衷,拿不出政策?
The consequences to wait for market to correct itself will be huge if nothing to be done immediately, RIGHT NOW!!!
中等收入家庭都買不起房子,年輕一代連頭上一片瓦的問題都應付不了,這不只是個人和家庭事



Article from 鄭丁賢‧《星洲日報》副總編輯‧

http://opinions.sinchew-i.com/node/16387


儘管屋價已近天高,房屋發展商和“專家”告訴大家,大馬房屋市場沒有泡沫,健全得很。

言下之意,屋價還會上漲,直衝太空;想要買的人,要趕快衝進去買,不想買的,也是時候買了。

要不然,就會“來不及”了。

就好像告訴你,蘇州過後無艇搭,這是最後一個機會。

再不買的話,準備以後買一座骨灰塔吧!

全球金融風暴發生前,美國、英國、歐洲各地的“專家”也說,市場沒有泡沫,只有讓美夢成真,趕快買吧!

於是,大家著魔似的,一股腦兒投入房屋市場;連許多退休領養老金的,以及失業領救濟金的,也把最後一點身家丟了進去。

接下來,房屋市場崩盤;屋子成為負資產,供不起,賣不出;屋子被銀行拍賣,屋主流落街頭。

兩年後的今天,大量房屋依然空置,再便宜也沒有人要。

近期的《時代》雜誌,用照片呈現克里夫蘭市的慘狀。昔日美麗的住宅區,已經滿目瘡痍,淪為吸毒者和乞丐的棲身之鬼域。

不,我沒有說大馬的房屋市場已經泡沫化了,就快崩盤了;不是的,我不是“專家”,不能做這種預測,更負不起責任。

我甚至不是潛在的購屋者,沒有切身利害關係。

但是,這不能阻止我生氣,這是小老百姓式的生氣。

發展商只有興趣蓋百萬豪宅,炒屋者投機地節節炒高屋價,政府置身度外,沒有對策。

於是,幾年前價值15萬令吉的公寓,如今要賣30萬令吉;原來30萬令吉的排屋,現在開口要60萬令吉。

新推出的共管公寓,隨便都可以叫價百萬令吉;噢,這不是指吉隆坡城中城的豪華共管公寓,而是外圍地區的一般行情了。

對不起,這不叫經濟起飛,也不是經濟成長所帶動,這叫經濟扭曲,也是市場貪婪。

幾年來,大馬經濟成長數字很可憐,從負成長到區區的5%或6%;人民的收入,扣掉通膨,沒甚麼增加。至少在2020年之前,注定還是中低收入國家。

但是,房價是幾十巴仙的漲,三兩年就要翻倍;這種漲價不合邏輯,也沒有實質基礎。

發展商和“專家”們還說,快買啊,否則來不及了,還要漲的。

問題是,買得起嗎?值得買嗎?

馬來西亞不是地小人多的香港和日本,不是經濟飛騰的中國和新加坡,不是爛船也有幾噸釘的美英歐。

小老百姓有甚麼能力購買超高價房屋?發展商和炒屋客憑甚麼抬高屋價?政府有甚麼條件無動於衷,拿不出政策?

過去,大馬人民能夠引以為榮,或是自我安慰的理由,就是買得起房子。解決了房事,其它方面不行,還是勉強過得下去。

今後,中等收入家庭都買不起房子,年輕一代連頭上一片瓦的問題都應付不了,這不只是個人和家庭事,而是社會和經濟問題,也會成為政治難題。

星洲日報/馬荷加尼‧作者:鄭丁賢‧《星洲日報》副總編輯‧2010.09.21

 
September 25, 2010 at 10:54 AMAngeline

I couldn't agree more with jeremy, jeff, daamao and bobo. I also think that there is a sublte, but rising dissatisfaction and unhappiness with what is happening to the property prices in penang island,especially LANDED PROPERTY, and that 90% of true 'hopeful' homeowners cannot afford nor owe their home anymore. In fact many have no other alternatives but look towards mainland penang for their first landed home.

I am heartened by Balik Pulau MP Yusmadi Yusoff and assemblyman Pulau Jerejak Sim Tze Tzin, who have put a voice to the press and to our venerable LGE, Chief Minister about the ridiculous cost of homes in penang island. What I wonder is will the venerable LGE listen? or is he too busy looking for 2.2billion to finance the second bridge when the people of penang are this desperate for their dream home? (I digress and apologise that my anger is showing....)

Let us look objectively with what is happening.
Why hasn't Bank negara and the government done more to curb the ridiculous speculation going on? BECAUSE THEY CANNOT! why? because there is a major overhang of unsold property in malaysia. Penang island is part of malaysia, the government nor bank negara cannot implement strict measures for penang island only. Yet, if they impose rigorous measures like s'pore, hk and china - then matilah, the whole property segment in malaysia - property market will collapse! Google 'Laporan Status Pasaran Harta Tanah Q4 2009' - you will know what I mean. So in way, I can begin to understand why bank negara and government cannot do too much for us 'without a home' penangites (island).

Although we can hope that there will a scenario like US subprime issues - it WON'T HAPPEN. Why? because banks are quite stringent about lending out money. Those speculators have money and banks are quite willing to lend - simple as that.

Will there be mass demonstration - no, it won't happen either - because malaysians are quite complacent - 'cannot get a home in my own island, then look elsewhere -migrate out'. So that leaves jeremy, bobo, damaao, jeff and me to moan and winch about the true situation and I wonder if we will ever be heard.

Malaysia is a very young society - the median age is 28 years old! and this age group will be totally denied homes in penang island - simply because the state government (previous included) have not sat down and seen this happening, their hands were tied? corruption was rift? nose pulled by powerful developers? Have they thought about how a young couple with fixed salary, a rise of meagre 2% salry increment yearly, poor EPF dividend hope to purchase >800K home??? Is it too much for us to want a <600K landed property in penang island - is it impossible? no, no, no...... but it has been allowed to happen.

Is there a solution? I don't know, I'm no economist, but I know much can be done by the current state government to assist. It is a matter of whether they want to or not. Maybe we should all write a memorandum to the venerable LGE, because I doubt he reads this moaning and pure frustration.......

My 20 cents worth of woes (inflation mah).
AngelineC.

 
May 11, 2011 at 1:15 AMkevin

how should BNM act to curb bubble from speculation?BNM can only impose policy on end financing lending for higher-end property lending so as to limit the hi end property developement but they cannot control the appreciation of property prices.A good gov should increase real purchasing power agaisnt property prices or like many countries gov should probably act as a developer to provide more affordable houses to us through land reclaimation or etc.in penang land scarcity is a major problem most land owners are inherited from last or last few generation.in order to see affordable properties unless they are selling it cheap which i really doubt it.even for land reclaimaation the cost of doing so is quite costly as well.these are all d price of capitalism and it is inevitable.i agree with buying suburb properties with cheaper price provided that the gov provide us fast cheap and convenient public trasportation which i also doubt it.so what can we do?