Post date: Sep 17, 2010 3:14:8 PM
SPECULATION of a possible property bubble in the country has led to assumption of a price war among banks for consumer loans. Meanwhile, developers opine there is no reason to curb bank loans as the probability of a bubble is low.
And it was reported that Bank Negara Malaysia (BNM) has been talking to financial institutions on possible measures to curb excessive speculation.
The central bank is said to have written to them for feedback on the possibility of capping the loan-to-value (LVR) ratio of mortgages at 80 per cent to avert the risk of a potential property bubble.
Currently, banks can lend up to 90 per cent of the house value or even 100 per cent in certain cases.
It is also believed that BNM may consider discontinuing the 5:95 and 10:90 housing loan packages and prefer banks to impose higher downpayment for property buyers.
Affordable properties priced between RM200,000 and RM400,000 make up the bulk of the market. Within the Klang Valley's prime areas, prices of these properties can rise up to RM600, 000.
Today, 90 per cent of the population live in affordable homes. The current low downpayment for buyers has enabled the lower- and middle- income groups to afford homes.
If higher downpayments are imposed on these types of properties, homeownership among these groups is expected to decline.
"High-end properties of RM1 million and above only account for 10 per cent of the market. It would be difficult to speculate as they consist of the minority group," said property veteran P.K. Poh, who is also Amphil Corp Sdn Bhd chief executive officer and director.
"There are no foreign investments and evidence that have shown a potential probability of a property bubble. Therefore, there would not be any similarities compared to the other countries in the region such as South Korea, Singapore and Hong Kong," Poh added.
Said Real Estate and Housing Developers' Association president Datuk Michael Yam: "There is no apparent sign of overspeculation and the delinquency of loan defaults have been very low, so why introduce curbs that will dampen an industry and its related economic activities that are recovering from the global financial crisis two years ago?
"Our research backed by a recent survey of our members indicates no overheating of property prices nor development of a bubble."
According to Yam, the odd reports by the media of a few properties being bought at high prices are few and far between and occurred selectively in the hotspots of Kuala Lumpur City Centre.
The bulk of the purchases in the primary suburban areas are generally landed houses. These have appreciated in value in recent years, reflecting the scarcity of land, lack of supply in prime areas and escalating construction costs.
He also said banks are much stronger now, prudent and have stringent credit assessment and evaluation processses, noting "so why not leave it to them to decide who, what and how much to lend".
On the attractive homeownership plans offered by some developers, he said the 5:95, 10:90 or 20:80 schemes are part of marketing packages for the convenience of customers and are still subject to the banks' terms and conditions and strict credit assessment before the advertised margins are finally offered.
"It is not an unconditional offer, so BNM should not be unduly worried," Yam said.
SP Setia Bhd president and CEO Tan Sri Liew Kee Sin said there is no reason to curb bank loans as the financial institutions have been very prudent in their approvals.
"For instance, even with the 5:95 financing package, not all applicants qualify for the full 95 per cent financing. Banks have been managing their risks well and should be allowed to continue doing that at their own discretion."
He said the main reason for discontinuing such financing packages is because of the fear of nonperforming loans (NPLs).
"There has been talk on BNM tightening mortgage lending rules and the possibility of capping the LVR for mortgages at 80 per cent.
We don't think this cap is necessary as the local property market is less speculative compared to that in Singapore and Hong Kong.
"As such, there is little danger of widespread defaults or NPLs," Liew noted.
Mah Sing Group Bhd group managing director and CEO Tan Sri Leong Hoy Kum said a conducive financing environment is important to support the property industry, which is a significant engine of growth for the economy.
"We are confident the banks are very selective and have strict guidelines when giving out loans. We hope BNM will look at the current market conditions and consider feedback from the industry players - both the financial institutions and developers - before taking any steps.
"We believe market forces will prevail and any prescription given must be thorough and selective as there is no one-size-fits-all solutions."
Leong added that as properties remain the preferred asset for many Malaysians, he hopes the current accommodative and supportive financial environment will be maintained to boost economic growth.
Sunway City Bhd managing director, property development division, Malaysia, Ho Han Sang said the company does not feel it is necessary to curb bank loans at this stage as the real estate market is still under control and should let market forces dictate the direction.
Moreover, he said the banks are very prudent, which means not everyone enjoys the high financing margin.
"It is not timely to implement the 80 per cent loan margin cap on housing at this juncture because only the market of certain sectors has experienced good take-up rate and it is not across the board. In other words, the price increase in the sector is not rampant.
"Additionally, implementing the loan margin cap will deprrive the lower- income group from buying lowerpriced properties," Ho added.
Meanwhile, in Singapore, in addition to the raft of measures to pre-empt the private property market from overheating, its latest regulation to curb flipping is aimed at buyers with at least one outstanding mortgage. The minimum cash payment is now raised from five to 10 per cent of valuation while the maximum amount a bank can lend is capped at 70 per cent, down from 80 per cent.
In South Korea, on the contrary, the government is now easing rules to help people who want to buy homes with a package of measures to boost the real estate market that has gone through a slump.
The housing market bolstering measures come amid the sluggish market after the government kept a tough regulation on those who planned to take out mortgage loans by placing a 40 to 60 per cent ratio ceiling linked to their incomes. That was criticised as the main cause for the market contraction.