those who are intending to purchase their first prop should rejoice as this would prolly cool down the current buoyant prop mkt but to prop investors...

Ref No: 11/10/02

Embargo: For immediate release

Measures in Promoting a Stable and Sustainable Property Market and Sound Financial and Debt Management of Households

Bank Negara Malaysia wishes to announce with immediate effect the implementation of a maximum loan-to-value (LTV) ratio of 70%, which will be applicable to the third house financing facility taken out by a borrower. Financing facilities for purchase of the first and second homes are not affected and borrowers will continue to be able to obtain financing for these purchases at the present prevailing LTV level applied by individual banks based on their internal credit policies. The measure aims to support a stable and sustainable property market, and promote the continued affordability of homes for the general public.

At the national level, residential property prices have increased steadily in tandem with economic development and the rise in income levels. This aggregate growth trend remains largely manageable and has not deviated from the long term trend in residential property prices. In the more recent period, however, specific locations, particularly in and around urban centres, have experienced faster growth, both in the number of transactions and in house prices. This is further supported by an increase in financing provided for multiple unit purchases by a single borrower, suggesting increasing investment activity that is of a speculative nature.

The targeted implementation of the LTV ratio is expected to moderate the excessive investment and speculative activity in the residential property market which has resulted in higher than average price increases in such locations. This has also led to increases in house prices in surrounding locations, thus contributing to the declining overall affordability of homes for genuine house buyers. This measure therefore remains supportive of the objective of encouraging home ownership among Malaysians which continues to be an important national agenda.

Introduction of the Financial Capability Programme

As part of the continuous efforts to raise the level of financial literacy and to promote sound financial and debt management by Malaysians, Bank Negara Malaysia also wishes to announce the introduction of the Financial Capability Programme. This Programme will be offered by Agensi Kaunseling dan Pengurusan Kredit (AKPK) through its establishments nationwide and will commence from January 2011. The Programme is aimed at equipping individuals with important knowledge for responsible financial decisions by gaining practical understanding and skills in money and debt management. This in turn will contribute towards preserving the sound financial positions of households and ensure that debt accumulation is commensurate with household affordability, including their ability to absorb interest rate adjustments and potential volatility to income and expense levels. Individuals particularly new prospective borrowers and young adults are strongly encouraged to participate in this specially designed programme. The details of the implementation of the Financial Capability Programme will be announced later in December this year.


Bank Negara Malaysia
3 November 2010

© Bank Negara Malaysia, 2010. All rights reserved.

Sos cili: http://www.bnm.gov.my/index.php?ch=8&pg=14&ac=2159

This post has been edited by babana: Nov 3 2010, 06:02 PM

Right move... prop should cold down... no more speculators buying houses without downpayment...

great news... thanks for sharing...

They will be a lot of properties available for you and me...

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Added on November 3, 2010, 7:34 pm

But third property here meaning, when you have first and second under your name, then 3rd one will be subjected to the 70% or property no 3 and above although you have already sold first and second house?

This post has been edited by yeowa: Nov 3 2010, 07:35 PM

Phew.... good... only third property onwards...

i do not think this will have any effect on the price..let wait and see

How does it affect the property market price? I personally think it wont affect the price. Anyone mind to explain further.

Thanks

i also feel that it will not have any effect...><

it will not affect the price, good news for those home stayers, easier to get the choice units as flippers will stay away already...

Don't think this will affect the prices a lot too. speculators will still buy using family members name to get the 90% LTV.

it will affect property wit high concentration of FLIPPERS.... no offence i think one of them is Empire City and many more....

If their family members are eligible (provided sufficient income statement) it doesn't make any different before and after. Frankly, how many members will give their name for loan?

Just some clarification. If a buyer finance his first propperty with bank 90% bank loan, but buy the second property by cash. Is he entitled to get 90% loan for the third property???

which will be applicable to the third house financing facility taken out by a borrower.
Yes.

That's what i understand from the statement as well. Thanks a lot.

Shit! if i apply loan today then 70% ? this is my 3rd applicaton... damn

does that mean if one has 10 properties paid by cash, then 11 property still 90% loan ?

yes, plus its easy to say "use family member name maa.." but then, if u use their name, so later on they cant use their names to get the 90% right?

i think this is a good move, help d genuine buyer and push the speculator and joy bidder away.

I foresee developers who sell studios recently will get hit by this. Reason is because most of the investors bought few units at one go and now they can only get 70% loan, for sure they will just cancel the booking or just buy one unit instead of a few.

This post has been edited by super911: Nov 3 2010, 09:24 PM

all i can say is "better than none". at least there will be something to at least slow down the increasing of property prices nowadays. hopefully there will be more which would benefits 1st time buyers.

This post has been edited by ccheng0085: Nov 3 2010, 09:25 PM

This is a wise move by BNM. IMO, property prices will cool down, but unlikely to drop. Those badly affected will be the recent launched projects, especially studio/soho developments (whee there are a lots of flippers)...

i am wonder... how about i submit loan on yesterday.. pending approval.. still 70% ? on my godd... how come (this is 3rd property).. pity

BUT,

i am sure the developers & the banks will find ways to solve this:-

1) Developers will further inflated the property prices, then give you say 20% discount, end up you only pay 10%...

or

2) Banks will give you housing loan 70%-LTR + personal loan 20% at the same lending rates

I wonder how BNM will tackle this?

Many sohos/studio are under commercial title, so it is considered non-residential, BNM policy of LTV 70% applies on 3rd house (which is residential), this is the doubt that need to be clear....

---

Added on November 3, 2010, 10:31 pmVery unlikely this will happen, bank negara may not smart but they are not stupid. I am sure there will be a measurement and control to stop this from happening. Most of the developers are public listed companies and subject to auditing, if they try to be smart and do something funny and against the BNM ruling like creating thousands of credit notes (as rebates to home buyers) they will be in the trouble. I dont think these big names like SP Setia, Mah Sing, I&P, Sime Darby will take risks and play funny with BNM.

On the bank side, all commercial banks licence are controlled by BNM, and subject to BNM annual audits..

This post has been edited by cheahcw2003: Nov 3 2010, 10:33 PM

The govt has already given sufficient warning during past 1 to 2 months. So no surprise here.

Only today it is confirmed. They should have confirmed during budget day.

Wait for another surprise ie. increase in RPGT.

actually the RPGT are in place, just timing not right now
with GST also in the pipeline, dun play play

I mean RPGT of up to 30% for first year instead of 5%.

Govt also talking about this during past 1 to 2 months.

RPGT nx year thingy...

and use family name how about he/she just sell the house and walk away, you lose you downpayment and appreciation on price.

use close family members only lar. parents bro sis. and if you have trust should be ok.

sometime family also hard to trust when there is money involve, and what can you do to them when they sell the house, it is perfectly legal, they own the house.

different family different circumstances lar. some ok some better not to involve in money.

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Added on November 4, 2010, 12:01 ammay i ask if the buyer already have two property finance with 90% loan, and if he sell off one of the property. is he able to get 90% loan for a new property??

This post has been edited by pinkdevil88: Nov 4 2010, 12:01 AM

robertngo, i think u misunderstood me. or perhaps i misinterpret wht u trying to say.

anyway, im saying that its not an easy task for ppl who think they can just simply use their siblings name to purchase a property. alot of problem will arise later on. Like i sed, if ur dad use ur name, then later when u graduate and want to buy your own house, u will not get the 90% loan becoz ur dad applied earlier using ur name. thats what im trying to say bro.

understand bro

Looks like the statement issued by BNM is still a bit unclear. need to wait and see the implementation from the banks before we can conclude the impact on property prices.

from my interpretation of the statement it seems that if a buyer previously apply for loan to buy two property(say 10 years ago??), and later on sell it off due to personal financial circumstances. he is now currently not able to have another 90% loan to buy a new "third" home. Sounds a bit unfair to me. What do you guys think??

i think it is fair, most people will not be changing to third property unless they have increase income or for investment.

from my example i said that what if the person need to sell of the previous two financed property due to poor financial circumstances??

say that when his company is making good money, he bought two property using financing.

after few years, the company business went downwards and bankrupt. he is forced to sell off both properties and rent a flat.

now with this implementation, he will need to have 30% downpayment before he can buy a "third" home for his family??

I could imagine how a under 30 middle exec getting easily tangled up in the 70% LTV restriction. He could have purchased his first investment prop for rental & a second apartment in which he's staying now. And he wants to buy a landed prop now as he anticipates starting a family. So effectively this is his 3rd purchase! So unless if he disposes of one, most likely the one he's occupying in, as the other (1st prop) makes for a better investment play both in caps & yields. So what is this chap supposed to do if he doesn't want to fork out 30% d/p?? He has to sell the apartment he's staying in to qualify, which also means he has to wait for his 2nd loan to be fully redeemed for the records, by which time he would probably has lost the opportunity of buying the 3rd (landed prop) he's been eyeing! Or at least he would he would lost the opportunity to lock in the purchase at the earlier asking price (that's assuming ceteris paribus that prices are on the constant uptrend). It would also mean that he has to move out of his 2nd prop to facillitate its sale before he purchases his 3rd!! Phew! What a cock up of the whole chain of events for that young exec! He'll probably just give up & settle for his 2nd tiny apartment at the end of the day despite planning for a growing family. Think the policy would have made more sense if the LTV cap would have been on the 4th prop purchase or at least clearcut guidelines are made between investment props or props meant for self occupation!

if i'm your bro ..I also don't let you to use my name. not because of money or what...but one day I also have to buy house for myself.

Well, your explaination does sound viable but bear in my mind that the 1st time home buyers are those that are suffering more at the moment with all the hiked up property prices. At such, I think it wouldn't be fair to look at the example situation that you have mentioned above - if a person can afford to purchase 2 properties before he hits the age 30 and still has the onlook for an 3rd, I would say he is quite steady financially and at such the 70% LTV does works in its interest.

U may be right. I may have been speaking for the under 30 high achievers. I assure u that it wouldn't have been very difficult for young execs to hit 2 to 3 props in the last 2 to 3 years of easy credit, dibs, no d/p schemes.

AGREED. At times, I do reflect myself being in the moderate-income frame. How are they going to afford a property with hiked up price nowadays.

as i say different family different circumstances lar. some will agree, some wont. plus i dun think this is a long term implementation, once the property market cool down the LTv will be back to 90%. can you imagine this restriction still applies during a recession?? looks impossible to me.

Just imagine if u were like that young fler who owns 2 sub 200k props now & is trying to buy himself a 400k landed prop. He would have to dig into his pocket for 120k as d/p, wouldn't this be unnecessary hardship with the 70pc LTV??

Yes, but I'm trying to put myself in the shoes of an moderate earner who is slogging to meet then ends in daily life and how will they worry on getting a roof over their head with the current property prices???

If that young guy can afford to hold on to TWO properties - I feel going for an THIRD is on personal choice and doesn't require an interference or consideration from the Government or any agencies. My concern will will be on the FIRST purchaser for that group are the MOST affected from the Property Price Hike.

Does that mean if you sell off your any of your 1st two properties, then you wouldn't be bounded by the LTV 70% cap?

Anyone in the know?

This post has been edited by mageP23: Nov 4 2010, 02:09 AM

U're right again. Giving credit to your 1st time purchaser who has to scrape by to make ends meet, the govt has made provisions for 100pc loan for purchases below 220k. But there's also this group who wants to move up beyond 1st or 2nd purchase to a decent landed prop which needs to be addressed. I would think that clearer guidelines should have drawn for this group to move up the property ladder without unnecessary burdensome caps on loans. Yet clearer statistics should have been drawn of the makeup of this group of buyers who are interested in props below 220k instead of a blanket call for an LTV cap. I would actually think it's more political than purely driven by market considerations. But i do concede to your thoughtful points. Thank u for the meaningful discussion.

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Added on November 4, 2010, 2:11 amThat's where it was ambivalent, it mentioned 'property' not 'loans'. I think more will be revealed ahead. Let's bide our time.

This post has been edited by Daryl Teo: Nov 4 2010, 02:15 AM

I am thinking about that too, is like having the cheaper property sell off and look for the LTV 90% for more expensive property...But from the statement, is should be this way though..

Need someone to confirm it

I am not sure if the developer will give up to 20% discount. Not sure if that is allowed.

From my experience, for second hand property, bank will not issue you the loan just based on the selling price as per S&P. Bank will need to send a valuer to assess the value of the property and will be basing on that cap when offer loan to you.

Use close family members name is a way, but remember they need to have income. If they don't have sufficient income, they will not qualify to get a loan at all. And if they have income, remember to minus their other commitments like car loan and other instalments.

to be honest, if the property is hold by many foreign investors and push the price up, the property market is healthier.... just the locals need to compete with the price those foreigners have.

One question here.

Can I still apply loan @ 90% if I purchase my third house with my wife? For the 1st and 2nd house, I already purchase using my name only for the loan.

Any comment?

don't over do with property market. 1997 we already faced it once and it bleed me dry, really dry. ppl rich like USA (and the house is cheap there...well, NYC is an exception though) also get hit.

property market is so tempting but somehow, it is the root cause of many people become "tied crab" as we are paying the morgage usually in long term.

just my opinion.

I think it's depending on the number of properties you bought, if the intention of BNM is to curb over-speculation.

why would young high achiever have problem putting 30% down on a 400k property? maybe our definition of high achiever is different.

Good move at the right time by BNM. Some sort of signal was needed to stop property sector from overheating.

I would think that most regular people will in their whole life only buy 1 or 2 properties, so they won't be affected.

High achievers probably hav high income figure to qualify for loans.. but maybe not enough capital or savings for downpayment!!

*not all high income earners have high savings..

This post has been edited by eugene jk: Nov 4 2010, 10:28 AM

very good exchange of ideas both of you had going.
would like to add my 2 cents worth:
1. fully agreed with your scenario for i believe i'm in quite an exact position as what you have proclaimed. for the late twenties to the 30's group, they are indeed looking for a upgrade to their unit. i fully concur if the ruling were meant from 4th property/loan onwards. that will make much more sense IMHO.
2. they are too many uncertainties by way the announcement was made. BNM have declared with immediate effect but my guess is the following questions will not be answerable by the bank. eg:
a) if the purchase is under joint name where one of them is purchasing their say 5th unit and the other party is into their 2nd unit. how much margin can they get? 90% or 70%?
b) as most forummers have mentioned, is it property based, or loan based?
c) irrespective of loans or properties, what if the buyer have settled or disposed of their loans/properties? should the ruling be for 'active' loans or ownership of properties only be more sensible?
d) they are some other multiple cases such as names appearing in SPA only but not loans. and some appearing in SPA and loans but not servicing the loan. and etc. how does that take into account the person's eligibility?

now this is purely my thoughts; i am foreseeing no drastic drop in prices, more creative financing packages by developers and banks, BUT increase in rental prices. don't ask me why. just a hunch. so if that materialise, it will not actually help 1st time buyers but actually makes the escalate the property bubble lah. property price already high, rental increase to become high also. BOOM!

am surprised brother Pai have not spoken yet!

For a couple: husband & wife they can have 4 properties between them. Still reasonable....

if the wife or husband is working has enough income to service the loan

more clarifications needs to be set out by BNM before we can assume a couple can have 4 props between them. i.e. if the couple has 2 props on a joint loan account, would they have met the threshold of 2 props already or its considered 0.5 + 0.5 = 1 per pax?

also, like wat many forumners have pointed out above - what if the husband has say...3 houses under his name but the wife only has 1? well, one may argue that the couple can just buy the prop and take the loan under the wife's name...but more often than not, u need the power of 2 incomes to meet the bank's loan eligibity criteria. as of now, everyone is still in the dark on how would the LTV be calculated...just hope the further details to be issued by BNM would be intended to cool the prop market instead of being punitive in nature.

Still need clarify whether this 3rd means 3rd property or 3rd financial loan on hand. If is the latter, will it affect sub sale market as owners force to sell cheap and fast to free up for buying new developments?

2 big questions about this is :

1. Does the rule apply to 3 loans for properties running CONCURRENTLY or 3 loans for properties over your lifetime?

2. Does this apply to refinancing? If you refinance your house once, does that mean you already took 2 loans?

probably a "lost" for those young investors who purchased first and second low cost properties for investment, and then they want the third property for own stay (which usually worth higher)....

"Bank Negara Malaysia wishes to announce with immediate effect the implementation of a maximum loan-to-value (LTV) ratio of 70%, which will be applicable to the third house financing facility taken out by a borrower. Financing facilities for purchase of the first and second homes are not affected and borrowers will continue to be able to obtain financing for these purchases at the present prevailing LTV level applied by individual banks based on their internal credit policie"

house financing facility means is loan, not 3rd property right?

source: http://www.bnm.gov.my/index.php?ch=8&pg=14&ac=2159

My 2 cents:

I prefer to think of it as loan because it is LTV (Loan to Value) instead of referring to property. You may have property that you have paid off or inherited. This does not affect anything in the market because the main purpose of LTV 70% is to curb speculators and investors taking such high loan (90-95%) for every property that they buy. With such easy financing from the bank, it helps the speculators to prosper and inflate the property market "bubble".

therefore, having 3 property under your name might not be a problem, but getting the third loan under your name will be subjected to LTV 70%

house financing facility is loan

in this case, is house financing facility for 3rd property, i.e. loan for your 3rd property

That is what i understand from this also. it's the loan, not the property under your name.

yup, LTV is meant to be refering to loan on the property attached to it. maybe i should rephrase my earlier example as a husband who has 3 props with 3 loans under his name vs a wife who only owns a single prop with a loan under her name.

well if one were to buy props on cash in the first place, they wouldnt be concerned with this ruling at all...save for the impact on prop prices!

This post has been edited by babana: Nov 4 2010, 11:22 AM

i think they should capped it at active loans only and not encompass loans which have been fully redeemed.

PS: for those who have multiple loans, i guess if you refinance the amount paid on your 1st few purchases, you should have more than enough to pay the 30% right? <evil grin>

i think is a good move by the government, how bout others opinion?

So? Don't want to fork out 30% d/p then don't buy la. Simple as that and if that someone doesn't have enough money to make a 30% downpayment for their third house then too bad, don't buy it.

Totally AGREE.......

like some of people already mention, i don't think those young exec with already existing 2 property is deeply affected. They still can sell off one of their 2 existing property to get another higher value property with 90% loan.

Those that affected badly is those that bought in large amount at one time.
they need 3X more budget to resume their normal activity

This post has been edited by kyle9: Nov 4 2010, 12:02 PM

i wonder those who sapu empire city but loan not approve yet how ah?

chance for those new buyer to get those new dev that been told SOLD OUT

can relax bit now.

+1. Simple as that... ppl can come out with thousands of excuses & create scenario watever they want... but the ruling is clear cut.

Pure commercial prop excluded. Party on for shops, can loan up to 80-85%

This post has been edited by yfo: Nov 4 2010, 12:19 PM

Totally agree. That's exactly the main objective from the government. It's not that when you dont have the money, and just because you want to buy it, you can buy it. You must have the money, in this case, 30% d/p. And bear in mind, this is only for 3rd property onwards, not 1st property. I sincerely thinks that this is a very good move from the government. Let me assume something, let say before this implementation from the government, the LTV is 100%, and the government only adjusted the LTV to 90%, these ppl still going to whine. Because they edi have this mindset - even i don't have the money, i can own 10 houses, now i gonna fork out the 10% d/p, where do i find the money? How can government do this? If the government protect the 1st house buyer, how can i be rich?

This post has been edited by babyekc: Nov 4 2010, 12:27 PM

double that, but there is still a lot of complain from people (DOOMSDAY topic in myrealestate forum)

what do u think which is more needed help? Buyer who are looking for 1st 2nd time property or those who wanted a 3rd property?

then buyer sell either 1 of 2 properties lo to get 3rd property loan.
people in the other forum complain cause now they cant sapu few floors already. haha

Whenever there is "unfair enrichment", there should be regulation...

my real estate agent told me today a lot of pending cases (paid 2% deposit but s and p not sign yet) are stuck bcos of this 70% loan announcement today.

what if I've already signed the letter of offer from the bank but loan agreement not signed yet? s&p all done.

need to find more money?

i think they will honor it...becos the loan is approved before the announcement....

lolllzzz....

you're lucky. as long as loan approved before announcement, then ok.

your third house, is it ?

Why care even it's 50% LTV for 3rd house?? to be effective, impose RPGT 25-30% for first year and slowly reduce it for next 4 year then only u will see the impact. For instance, myself and wife needs only 1 house to stay. with this, we can get 4 houses without triggering this requirement! idiot! totally ineffective in curbing speculation!! learn from singapore, impose 70% on second house and cahrge higher stamp duty and tax.

For 3rd purchasers.. no need to guess here... just called up your own bankers and check it out...

Personally very agreed on with BNM step but not with "immediate effect today" .. should give 1 month or immediate effect from next year , 1 Jan2010..

This post has been edited by cutealex: Nov 4 2010, 01:47 PM

Been busy

Anyhow I applaud BNM for making such bold move even at the expense of the short-medium term economic results. All I can say is that speculators will cry, home owners will cheer, and its BAU for fundamentally driven investors.

Also, if one is creative enough there are couple of ways you can still get 90% MOF...........

I may have been referring to genuine upgraders & not margin punters. Don't u think a valuation approach to the limit of the 1st two purchases would have made more sense than a dismissive LTV cap on the 3rd? On 1st time purchasers the govt has already stepped in with provisions for purchases made under the 220k beltline. Here the measure is to curb speculative activities on the 3rd purchase not, if everyone has read correctly, to aid the 1st time purchaser. It is very common among many young msians to have bought their first starter home, usually an apartment & then later another for investment, who now wants to upgrade to a landed prop. Policy could have less dismissive to address the concerns of this group of genuine upgraders. Otherwise usisng the bank's internal vetting of the individual current debt gearing & limiting it no more than 40% of their income would have been more effective in curbing speculation & keeping household debts in check.

Sun Tzu Art Of War - strike when the enemy least expected it...

great, that's 1 of the way to stop rich gets richer and poor gets poorer.

If you're a "genuine upgrader" want to upgrade but have no money for the 30% d/p, sell your apartment , rent a place and start buying the landed property. Simple.
In that case, everyone can give the same scenario as an excuse for owning three property using bank loans.
To me it's just an excuse.

Why not make it 5 houses then ? I also can create a scenario whereby young msians bought their first starter home, usually an apartment & then later 3 more for investment, who now wants to "upgrade" to a landed prop.

This post has been edited by Drian: Nov 4 2010, 02:17 PM

yes... give opportunity to the poor who are genuinely ready to grab the advantage.

else, if we give it to the poor and they cannot even afford the dp, there is no point also

Check your line of thought. What are you doing with the first two property?

"Upgraders"?

So government must protect this group of "upgraders" coz they so kesian: 1st property only a small apartment , and 2nd is investment, and then when they need to pay 30% deposit coz this LTV 70% is so unfair coz they wanna genuinely "upgrade" to a "proper" house to stay...?

Actually if the property investors are really really rich, this move doesn't affect them as they can afford to pay cash full for the property. It's only those who are not that rich but want to own many property, who can't even pay 30% downpayment that will be affected by this.

can't they just sell off the 1st house and upgrade?

if really for own staying, it is always advice settled the loan ASAP
why not just settled the loan since it small apartment/loan & buy the dream house with 90% loan lor
unless already cannot afford in the first place