Apr 16 2012, 03:55 PM
QUOTE(DeepValue @ Apr 16 2012, 12:45 AM)
well, i am not an expert in property and is not in the business of investing in it to make money either. Though i am involve in plenty of speculation nonetheless... The first step is to identify and recognize the issue. Here i see the main risk as twofold - political and the banking system. Politically, BNM, although Zeti, well regarded in the region as independent, will still be subjected to the ruling party's agenda. Very much like China, there will be widespread unrest, if property price were to continue the appreciation trajectory of 2005-20010; thus with the crisis in Europe and the monetary tightening measures in China, coupled with outright regulation on property, pxs came off and is in check. The Chinese took two very important measures to stir the market lower (the measure were introduced before but the timing of the cooling actually coincides with the default of greece - The Communist party will claim full credit nonetheless), one direct regulation on property ownership and restrict lending on 2nd or 3rd property -think foreigners are shut out of local financing also.. cant be too sure of the details... Second, they turn the tap off for developers, directing the banks to NOT lend to developers. Well, but frankly we can only control supply side and liquidity but DEMAND is stochastic. ie, if SNP breaks 2008 high, or China A shares sky rocket 200%, be sure that DEMAND will pick up regardless. on the flipside, if Italy or Spains next to blow up.. more measures on property may be not the right Medicine.
For the banking system, the risk is if banks takes took large a hit on the loan portfolio which ultimately will than force BNM to bail them out. Local banks have transform their books from predominantly corporate to household loans.. the rapid increase in household debt is unprecedented (this is consistent with many developing countries but Msia is up there on the most impressive year on year increase). The good news is the country treasury is abundance, and if theres a need for bail out, it should still be manageable if its not widespread. This time unlike 1997, the trigger will not be corporate debt defaulting, but household.
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'.
1) Why would the government get the 25% hit first? I have never seen government lending money to the rakyat in the first place. Even Bank Negara doesn't do that.For the banking system, the risk is if banks takes took large a hit on the loan portfolio which ultimately will than force BNM to bail them out. Local banks have transform their books from predominantly corporate to household loans.. the rapid increase in household debt is unprecedented (this is consistent with many developing countries but Msia is up there on the most impressive year on year increase). The good news is the country treasury is abundance, and if theres a need for bail out, it should still be manageable if its not widespread. This time unlike 1997, the trigger will not be corporate debt defaulting, but household.
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'.
2) Then there will be a conflict of interest for the government to make sure the property will go up.
3) to be fair, the safe guard is the human spending habit. If people doesn't change the way they spend money, it doesn't matter even if it's 0% entry or 30% downpayment, they will not be able to repay at some point of time and will end up having debts/credits.
4) the problem with bank is also they should have do with net salary even without BNM telling them to do so as it is simply impossible for someone who earn RM 3k gross and have a RM 2.5k loan repayment. But bank doesn't matter, the more you owe them money, the better it is cause bank would not be making money if no one owe them money. You will then forced to lelong your house to settle your debt at higher %
Quote
0.0540sec
0.59
7 queries
GZIP Disabled