QUOTE(DeepValue @ Apr 16 2012, 12:45 AM)
If we could turn back time, with the benefit of hindsight, the following can work
A - We want inflow, and we applaud the marketing (Najib and his crew has been infront of the foreign investors since 2009 when they start communicating their willingness for a strong ringgit - which most asian countries try to stir away as a stronger local currency will hurt exports) to bring in more capital inflows . But if this is flowing into property and unintentional consequences, than intervention is needed. We can slap duty/ tax on purchase of sales within x amount of time. ie if sold within 2 yrs, the stamp duty even for the seller would be x %, if 3 yrs y% etc.
B - More Regulations governing banks lending to developers or household on properties not finished yet. Stop financing 5% down payment with 0% financing during construction period programmes.
C - If you want to help young middle class, make it official instead of doing it at the developer level. Create a government body which can make up the difference for the required 30% downpayment. Ie, the govenrnment body pays 25%, and the couple pays 5%. For the 25%, the couple will have to pay a set interest rate determined by the government body. Thus the bank will be safeguarded and the government takes the first 25% hit, if the property falls in value.
These are some to share for now... notice i said if we can turn back time.. at the moment i think more careful consideration is needed before more measures are implemented. The bubble has already burst. I suspect if anything, there will be more curbs post election as policymakers for sure is taking into account that the election is a 'risk point'.
A) Yes, quite agree, that's why I always support RPGT. Earn profit, pay tax, reduce excessive short term speculation. Win-win-win situation, no one is hurt in RPGT.
B) Yes, 0% financing, no down payment or little down payment is always a big no.
C) I don't quite agree with gov body to interfere, it is like try to create another version of Freddie Mac and Fannie Mae?
Gov cannot take all the risk, while the buyer and banks are excluded the risk of first 25%, it may prompt irresponsibility behaviour afterwards, since the buyer and bank only bare small risk.
The one who apply the loan and the one approve the loan should be bare the risk, if not, bank do not afraid to release the loan, as long as the property price doesn't fall more than 25%.
It may prompt another version of subprime lending.
Why banks do not afraid to do subprime back then?
Because the risk of the subprime mortgage default can be transferred through securitisation of mortgages aka the one release the loan is not the one bare the risk of the loan.
It is very dangerous to have that aka "the one doing the business and gain profit out of it by giving out loan, is excluded the risk of defaulting of the loan".
Banks should not be safeguarded totally from the loan they are giving out, if not, it may drive excessive loan being given out. Banks business is simple, the more loan being given out, the more profit can be made as long as there is no default on the loan or bare the loss of loan defaulting
If there is excessive loan being given out, if there is something wrong on economy, or massive loan defaulting, there may no way of turning back, but need bail out from gov, which come from tax payer and ordinary people hard earned money only.
Yes, I applaud the effort to help the middle class affordability, but personally I don't think it is an appropriate way, it could have a backlash of another version of subprime.
We have seen how the repayment rate of PTPTN as well which give you a hint. No doubt PTPTN is beneficiary and helpful in nature.
Gov shouldn't interfere too much, unless through like Sg HDB flat concept.
Bubble has burst?
I do not think so.
Properties price is still high, and may be a bit slow, some corrected, but not seen any bursting effect at all.
Mar 25 2012, 05:59 PM
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