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

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.

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 believe kamaljit9 is speaking for the bulk of middle income/working class property investors instead of singling out that specific banker from the other thread...which imho represents one of the best examples which contributed to the implementation of 70% LTV by BNM.

like u said...3 units is considered moderate for today's middle income standards. i believe earlier on, another forumner illustrated an example with a young chap purchasing a mid-cost apartment for staying, another one for investment and looking towards upgrading to a landed. however, this LTV implementation only allows for 2 loans at 90% LTV. although concern definitely needs to be focused at those ppl intending to purchase their first home, however i'm not in full support of this implemention coz the wrath of this policy, imho is targetted at the wrong group of people (which is precisely those outlined by kamaljit9 above). cash rich aunties / uncles would still be able to buy (no more BBB but a single B ) with this 70% LTV ratio but genuine middle income homeowners looking for an upgrade would be hindered.

a more tasteful approach to curb incessant price increases and encouraging home ownership for first-timers would be reintroducing RPGT (although rumours have been going around for some time but nothing concrete has come out of it so far) or perhaps introducing LTV ratios on a staggered approach (80% for 3rd house, 75% for 4th house, etc). this will help curb price increases and flippers so newbies can have an opportunity in purchasing their own home...and at the same time discouraging ppl from buying in bulk too (like ehem...10 units at a time!)

This post has been edited by babana: Nov 12 2010, 02:56 PM

yup, that's right.