Lobby groups for the industry have been busy making their case heard, saying that any move to impose higher downpayments for houses would hurt the property market.
Their concerns come at a time as a growing number of people have complained that prices of houses, especially in the hotspots in the country such as the Klang Valley and Penang, are spiralling beyond affordability.
The last thing everybody needs is such speculation spreading to other areas where for the moment, speculative activity appears to be contained for the moment in the hotspots as 94% of houses sold in the country are priced below half a million ringgit and 85% of houses launched in the past nine months cost below RM500,000.
Dealing with speculation is tough and the last thing anyone should do is to make genuine buyers suffer, especially first time buyers.
Suggestions that houses costing below RM500,000 should not be subject to the new higher downpayment requirement makes sense.
Also first-time house buyers or owner occupied houses should be given the most ease of financing to allow them to fulfil the dream of owning a home.
It’s also hard to clamp down on speculative activity as the wealth creation process is an allure that developers, banks and policy makers might find hard to turn away.
After all, the money generated from flipping houses adds to the bottomlines of companies and the money in the hands of people could well filter down to other consumption activity that would go a long way to help spur economic activity.
But the profit from speculating activity, this time driven largely by cheap and ready financing, is unsustainable and history is full of examples of the dire consequences of a property bubble gone burst.
It’s then not surprising that the authorities in other countries in the region, where a property bubble has formed, are working hard to manage and diffuse the situation. Rules introduced in China, Hong Kong and Singapore are far more drastic that what the authorities here are reported to be contemplating.
In fact the new rules that are talked about are tame compared with what has been done in the past. In 1995, reports said that Bank Negara imposed a maximum 60% loan for residential properties priced above RM150,000 to put the brakes on the then fast rising house prices.
Furthermore, a real property gains tax of 30% was imposed on foreigners selling their properties irrespective of the holding period of the property.
Those measures were met with a huge hue and cry from the lobby groups, and developers who claimed that such draconian measures would maim the market. A couple of years later Malaysia entered its worst-ever recession, and as they say the rest is history.
The point is, just as the saying goes, those that fail to learn from history are doomed to repeat it, and for Malaysia, failing to deal with any property speculative bubble would spell trouble for the banks that have grown to rely more and more on households to drive their lending activity.
In the interest of financial stability and common sense, the move to act should be made soon.
Deputy news editor Jagdev Singh Sidhu is amazed just how much his house is “worth” in the secondary market.
By The Star (by Jagdev Singh Sidhu)
Posts
