Downtrend in property loans

PETALING JAYA: Bank Negara's move to require house buyers to pay a higher deposit seems to be weeding out speculation in the property market, some analysts said.

Its monthly statistical bulletin last week showed that for fourth consecutive months since November, the number of loan applications to buy residential property has reduced.

On Nov 2 last year, the central bank announced a 70% loan-to-value (LTV) cap on a borrower's third and subsequent house-financing facility, meaning that these buyers would have to fork out 30% of the purchase price.

The move was prompted by fears of a retail credit bubble fuelling speculation on the prices of residential properties. Certain areas reported price spikes that are indicative of speculation and multiple-unit purchases by individuals.

However, analysts cautioned that the data was not conclusive.

Some analysts said the decline in the first couple of months might be seasonal and believed data from March would accurately show the effects of the LTV rule.

RAM Rating Services Bhd's head of financial institutions ratings Promod Dass said: “Household financing facilities now account for approximately 55% (or RM489bil) of the local banking system's loans, with loans for the purchase of residential property comprising about half (RM238bil) of total household loans.

“Although the full impact of this move has yet to filter through given the short time since its implementation, loan applications for residential property purchases have started slowing down in the last two months of 2010 and January.

“The heftier down payment because of the more stringent 70% LTV cap is aimed at discouraging excessive over-leveraging in the property market. While the early signs are that this move has weeded out a degree of speculation in the residential property market, it will take at least six more months to gain a conclusive feel on whether such speculation has been curbed,” Promod said in an e-mail.

Malaysian Rating Corp vice-president and head of financial institutions ratings Anandakumar Jegarasasingam said the LTV ruling was insufficient to control the level of household sector debt in the economy or an unhealthy property price appreciation.

“Any individual who is purchasing a third residential property is either likely to be affluent or a reasonably savvy property speculator. If property speculation is to be curbed, the authorities should perhaps explore more direct measures involving taxes and prudential restrictions,” he said.

Another issue was whether the current trend of lower applications for housing loans could eventually lead to a softening of the property market.

ECM Libra said in its banking report yesterday that “residential property and non-residential loans approved have shrunk and are set to continue their downtrend.”

ECM Libra's analyst Bernard Ching said “loans growth are expected to taper off due to our expectation that property sales growth may slow down later this year as a result of the imposition of loan-to-value cap.”

Another analyst said the drop in housing loan applications, and the reduction in the number of loans approved, would eventually lead to a softening of the property market. “Increasingly, developers will find it more difficult to push sales and this will lead to a softening,” he said.

By The Star

Plenty of land for affordable housing

JOHOR BARU: Johor still has large tracts of lands in the suburban areas of the Johor Baru City for My First Home Scheme’s residential property development.

This will enable developers to build residential properties with decent built-up area to cater for first-time house buyers.

Unlike in Penang and the Klang Valley, developers in Johor are not hampered by the excessively high prices of land.

My First Home Scheme allows buyers earning less than RM3,000 monthly income to secure 100% financing from banks to buy houses costing between RM110,000 and RM220,000 to be repaid over 30 years.

Developers here agreed that while Iskandar Malaysia would continue to be the driving factor to boost demand for high-end residential properties in southern Johor, there is a big market for first-time house buyers.

“In fact, we have started the affordable housing scheme for first-time house buyers ahead of the Government’s initiative,’’ Seri Alam Properties Sdn Bhd acting head of subsidiary Frankie Tan Kiat How told StarBiz.

He said the company had allocated Phase 4A of Bandar Seri Alam township to develop 1,280-units of four-storey walk-up apartments, each of 1,000 sq ft and priced at RM130,000. It has sold 1,112 units.

Tan said the company would be launching 78 new four-storey walk-up apartment units in September with similar built up area but selling at RM140,000 each.

He said the higher price was due to escalating costs of building materials and labour. However, he claimed that the price was still attractive for those earning less than RM3,000 monthly.

Tan said the company chose to build four-storey walk-up apartment blocks as no lifts were required under the building by-laws for this type of building.

“We are able to sell the units at affordable prices as no extra money is needed to install lifts and to maintain them.’’

However, Tan said Seri Alam would be launching its seven-storey apartment blocks in the first quarter of 2012. Each unit has a built-up area of 1,100 sq ft and an indicative selling price of RM180,000.

Tan said the integrated transportation hub for the Eastern Gate Development Zone would improve connectivity from the zone to other parts of Iskandar Malaysia and a possible link-up with Singapore’s mass rapid transit system.

Seri Alam, is a wholly-owned subsidiary of United Malayan Land Bhd.

To date, 60% of the 1,348ha Bandar Seri Alam project has been developed with 10,000 residential and commercial properties. Launched in 1992, the township now has 50,000 residents.

Meanwhile, KGV-Lambert Smith Hampton director Samuel Tan Wee Cheng said the State Economic Planning Unit was supposed to come out with the new housing policy for first-time buyers in Johor two years ago.

He said among others, the new policy entailed the development of affordable houses priced between RM190,000 and RM220,000.

Wee Cheng said he did not understand why the policy was not implemented.

He said areas outside the district of Johor Baru suitable for the My First Home Scheme included Gelang Patah, Kulai, Pasir Gudang, Senai and Ulu Tiram where the demand for houses within that price range was strong.

He said the majority of house owners in these areas were either working class or entrepreneurs.

Furthermore, the children of these buyers who left home for work or marriage also preferred to live nearto their parents, he said.

“Building more houses here will create economic spillover effects to the other areas and they will eventually be developed in the long run,’’ he said.

Apart from houses, developers would also build shop offices, commercial centres or hypermarket-cum-shopping complex to complement the project.

He said if developers were to build houses for buyers under the scheme, they should go for single or double-storey link houses and not high-rise apartments.

Wee Cheng said although Kulai, Pasir Gudang and Senai were components of Iskandar Malaysia, prices of high-end houses in these areas were lower than those in Nusajaya, the administrative city of Iskandar Malaysia.

For instance, the selling price for new double-storey link houses in Nusajaya starts from RM450,000, and up to several million ringgit for semi-detached and bungalow houses.

SP Setia executive vice-president Datuk Chang Khim Wah said the company would be launching houses for buyers under the scheme towards the end of the year.

He said the scheme would be carried out at its ongoing Bukit Indah township due to its close proximity to the Malaysia-Singapore Second Link, which will cater for Malaysians working in the republic.

“We are going for high-rise apartment blocks with good security and landscaping as we believed that even first-time house buyers deserve good things in life,’’ he said.

Chang said SP Setia’s four ongoing projects in Johor – Bukit Indah, Setia Indah, Setia Tropika and Setia Eco Gardens – would keep the company busy for at least eight years. It will continue to look for new lands for future projects.

By The Star

MBSB ready to help first-time house buyers

KOTA KINABALU: Malaysian Building Society Bhd (MBSB) is "more than" ready to provide financing for first-time house buyers, although it is involved in the recently-launched "My First Home" scheme.

Chief executive officer Datuk Ahmad Zaini Othman said MBSB was not part of the 20 commercial banks under the scheme as it was not licensed to do so. "But that does not mean we cannot offer good prices to buyers.

"We can still be as competitive as those under the scheme. We sometimes provide 100 per cent financing anyway and we have several competitively priced packages now.

"It all depends on the loan applicants, how stable their income is and so on," he said.
Ahmad Zaini was speaking to reporters after launching their relocated branch in Lintas Jaya here yesterday.

"My First Home" was launched by the government with the collaboration of national mortgage company, Cagamas Bhd, and financial institutions to reduce the burden of the younger generation. It covers those earning les than RM3,000 a month. They can apply for 100 per cent financing from selected financial institutions for houses costing between RM100,000 and RM220,000 with a repayment period of 30 years.

Currently, 50 per cent of MBSB's business portfolio comes from mortgage loans and 30 per cent from personal financing loans.

By Business Times

Dijaya ventures into hotel biz in JV with Starwood Hotels & Resorts Worldwide

KUALA LUMPUR: Property-based DIJAYA CORPORATION BHD is venturing into the hotel business with US-based Starwood Hotels & Resorts Worldwide, Inc. to develop a W Hotel in Kuala Lumpur.

Dijaya said on Wednesday, April 6 the 150-room hotel is scheduled to open in 2016 and will mark the entry of the W brand to Malaysia.

Its independent non-executive chairman Datuk Rohana Mahmood said Dijaya was proud to collaborate with Starwood Hotels & Resorts Worldwide, a company with a long history of designing, building and managing world-class hotels and resorts.

“We have chosen a proven partner that is in line with our focus to grow with a dynamic presence,” she said.

Rohana said Dijaya’s venture into the hospitality industry underlined the company’s commitment to continued growth.

“Dijaya is seeking differentiation with regards to sustainability practices. With W Kuala Lumpur, Dijaya will work towards a Green Building Index (GBI) rating,” she said.

The hotel would be along Jalan Ampang, across the Petronas Twin Towers and 500 metres from the Kuala Lumpur Convention Centre (KLCC).

W Kuala Lumpur is designed by Skidmore, Owings & Merrill LLP from New York. Scheduled to open in 2016, W Kuala Lumpur will feature 150 rooms and suites with urban views.

By The EDGE Malaysia