go and look for it.

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Added on September 6, 2010, 10:27 amNo to 80% mortgage cap on housing
By ONG HAN SEAN
hansean@thestar.com.my

PETALING JAYA: Several groups are up in arms over a proposal to cut housing loans by 10% from the current cap of 90%, saying that the move will only discourage Malaysians from buying houses.

National House Buyer’s Association (HBA) and Federation of Malaysian Consumers Associations (Fomca) cautioned that the proposed home loan reduction to 80% would only be a burden to potential house buyers.

HBA honorary secretary-general Chang Kim Loong said the proposal would go against the Government’s plans to encourage home ownership.

“Young professionals who are just starting out will be deprived of buying a home for themselves. How are they going to get the 20% upfront payment?

“That does not include the legal fees and stamp duties house buyers have to pay,” said Chang when contacted yesterday.

He said the move would only be good if it targeted high-end buyers, as an effort to deter speculation.

On Sept 2, StarBiz reported that Bank Negara was engaging with banks on possible measures to curb excessive speculation on property prices.

One of the measures discussed was whether the central bank will be capping the loan-to-value ratio (LVR) for mortgages at 80% in order to avert the risk of a potential property bubble.

Currently, most banks provide loans of up to 90% of the value of the property.

Fomca secretary-general Muhd Sha’ani Abdullah urged the Govern­ment to ensure there was enough affordable housing available first before implementing such proposals.

“40% of the workforce earn up to RM1,500 a month. If this proposal were to be implemented across the board, how are they going to afford houses?” he asked.

Gerakan vice-president Datuk Mah Siew Keong said that if the proposal was applied across the board, the property market, construction industry, housing and real estate industry, and economic growth would slow down.

“Bank Negara must study the plan carefully, as the present limit of home loans of 90% has helped the housing and real estate industry,” said Mah, who is also the party’s economic development bureau chairman in a statement.

Housing and Local Government Minister Datuk Chor Chee Heung, however, said the measure would not dampen the housing market as in the long-term, it would actually be a healthy growth for the industry.

Banking sources said Bank Negara might consider discontinuing the 5:95 and 10:90 housing loan packages and impose higher downpayment for property purchasers.

This was due to a surge of between 10% and 30% in the price of landed properties in some parts of the Klang Valley and Penang.

This post has been edited by 106127: Sep 6 2010, 10:27 AM

They should make it 90% for first house , 80% for 2nd house 70% for third house etc.

spot on....just like how singapore works.....

A recent article from
http://www.themalaysianinsider.com/busines...-bubbling-over/
to be shared

Is the property market bubbling over?
By Lee Wei Lian September 07, 2010

Property prices have continued to surge despite a growing supply overhang and low occupancy rates. — Pictures by Choo Choy May
KUALA LUMPUR, Sept 7 — Prices of residential property have surged by as much as 35 per cent in the past year despite a growing overhang in supply, far outpacing income growth and giving rise to concerns that the market is becoming unsustainable.
Figures provided by the National Property Information Centre (Napic) show that average prices for homes in Malaysia rose a whopping 19 per cent to RM273,000 in the first half of this year, from RM220,000 in the same period last year. For Kuala Lumpur, the increase has been even more dramatic, rising an eye-watering 35 per cent to more than RM700,000 in the first half of the year, up from RM523,000 last year.

The market, however, may be starting to lose its appetite for properties due to the high prices.

Napic’s Property Overhang reports show that unsold properties in Malaysia rose to 22.6 per cent of new launches in the second quarter of this year, from 19.5 per cent in the fourth quarter of last year. For Kuala Lumpur, unsold properties rose to 16.1 per cent from 15.8 per cent, while for Selangor it rose to 14.6 per cent from 12.4 per cent.

Checks on developments completed this year also show that vacancy rates remain at 50 per cent or higher.

The Edge business weekly reported recently that the government is mulling capping mortgages to 80 per cent of value in a bid to keep the market from overheating although MCA has come out strongly against the move. This comes as Singapore introduced a series of measures to reign in investors and speculators, such as a 70 per cent mortgage cap for buyers with more than one property and launching 36,000 public housing units this year and next.

While Napic does not have a housing affordability index, a rough calculation shows that the average price of RM273,00 is about 5.6 times that of an average annual household income of RM48,000. The average price of a KL home is now a steep 13 times that of the average urban household income of RM54,000 and a possible sign that the market is headed for a bubble.

The sharp increase in prices is said to be at least partly due to speculative demand as investors snap up multiple properties in the hope that prices will keep on spiralling upward — despite low occupancy rates that could affect rental yields.

Some real estate agents and developers have privately expressed worries that the market is already too speculative and the price escalation is not sustainable.

“I am all for sustainable price growth but the current market is too speculative,” one developer told The Malaysian Insider. “Most of the units are taken up by employees of the developer hoping to sell for a profit when the development is completed.”

Many developments completed in the past year such as Ameera in SS2 Petaling Jaya, Cova Suites in Kota Damansara and Challis Damansara in Sunway Damansara are experiencing only about 30-50 per cent occupancy rates, according to real estate agents. A check on new high-end condo Zehn in Pantai where sellers are asking for RM2.2 million per unit revealed the building to be almost completely dark at night.


Rental yields are starting to slide given that supply far outstrips demand.
A typical unit at Ameera is on the market for RM750,000. Given a 90 per cent margin of financing (MOF) over a 20 year tenure, the monthly loan repayment for a unit there works out to be about RM4,855. Rental rates at Ameera, however, are only about RM3,000 for a partly furnished unit.
A stand-off could be developing where buyers are now balking even as sellers are trying to hold out for higher prices.

Red FM DJ Terry Ong who has been on the lookout for a condominium said that housing has become “unaffordable” and has taken himself out of the market.

“I am not in a hurry,” said the DJ who is currently paying RM1,100 in rent at a less than full condominium complex, where sellers are asking for between RM350,000 and RM400,000.

Engineer Edward Seah said that while he would like to upgrade from his current condominium, he will not buy another house given current valuations.

“Are such high prices warranted?” he questioned. “I refuse to feed into the current property frenzy.”

Housing and local government minister Datuk Chor Chee Heung said that the high savings rate in Malaysia meant that there appears to be no shortage of takers despite the prices.

He added that there will be a limit although he was unclear as to how far prices will continue to rise.

“We have to continuously tell developers not to push the boundaries,” he said when contacted by The Malaysian Insider. “There is bound to be a maximum.”

Chor said that the government is building some 76,000 low cost units that cost about RM42,000 each in the next three years, but it is unable to tell private developers how much to build to boost supply of middle class housing in the market.

Real Estate and Housing Developers Association (Rehda) president Datuk Michael Yam said that the issue of rising property prices was partly due to an imbalance of supply and demand as more migrants move to land scarce Kuala Lumpur as well as higher cost of raw materials.

“Even if 50,000 new housing units are needed in KL, that is still a huge number to build,” he said at a recent Rehda media briefing

Amazing data in that article.

With BLR at 6.3, using BLR -2.1 for 30 years, 700k property with 70k downpayment, monthly payment is 3,081.
Monthly income is 4,500.
3,081/ 4,500 = 68% of income is used to pay of housing loan.

Last year calculation, assuming income was lower by 3%:
With BLR at 5.8, using BLR -2.1 for 30 years, 523k property with 52.3k downpayment, monthly payment is 2,167.
Monthly income is 4,365.
2,167/ 4,365 = 50% of income is used to pay of housing loan.

Or thinking more simply, income increase can never keep up with property increasing by 35% or even 19% in 1 year.

I'm almost giving up buying my own place because of this. *sigh

almost .... I'm giving up.. on this...

Like Said, it's all about affordability and emotions! When the market turns negative, which is clearly going to happen here, the correction will take place. Listings are now way up and pricing being reduced daily in the high end market I'm following.

Remember when you ask yourself what your property is worth, the answer is what a buyer is willing to pay.

When prices start to slide matched with tighter lending practices and potentially higher interest rates, RE only goes one way.

And buyers, well....they sit and wait for another price reduction. Note though those ideal (well located properties) will go first, usually 5-10% before the bottom. Suggest you convince yourself to buy in before this time to secure them.

KL property being 13 time annual income is just crazy, how to sustain this kind of increase.

i cant wait...
when will be correction?
hope it comes soon...

In the end it boils down to technical and fundemental...

for those who cant wait to buy cheaper property. do you have the cash??
IMO it only benefits the cash rich buyer when the bubble burst.

Exactly, when the bubble burst banks will rise their interest rates and are reluctant to offer new loans. Hence you will probably need to shell out at least 15% to 20% d/payment while pay BLR or 1% + BLR.

The most apparent problem is how low/ long will the crash be? How cheap will it need to be before you feel it is justifiable to enter? And by that time most sharks would have lapped up the choicest properties. Happens every downturn be it shares or property.

You haven't mentioned about Penang? And how do you benchmark against 13 times income? using what salary? which property? What about an apartment unit rather other landed?

I would say the market for property is still considered not worst yet. Although there are speculation around, but hey what you earn is what you get.

3k earner - get a 200k apartment
combined 2 x 3k earner - now you are eligible for 300-400k landed

Isn't that bad right? Of cz 300-400k you can't stay in prime area, we are talking about sub-sales in suburban.

I always tot those who waited to buy props all this while will continue to wait even if prices dropped 10% to 20%. If they cant even put up the courage to buy when everyone around them makes money from props, I find it hard to believe that they'll suddenly grow a pair when everyone they know telling them not to buy, properties being foreclosed, banks not lending etc

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Added on September 8, 2010, 1:06 pmI tot' its 8-10 times annual income? How does one gets 13?

This post has been edited by Pai: Sep 8 2010, 01:06 PM

the ratio is mention in the article MFLooi posted.

its still very affordable

affordable should less that 5 times annual salary.

My calculations show the avg. is approaching 9x income. Understand that 13x income would put KL props at the worst in the world. Even about Vancouver BC in Canada at 10x and Sydney at 9.4x. If KV burbs are at 5.3x income affordable for this region would be 4x. I would be willing to buy at 5.5x income in KL top codes. I believe it's coming, but on the positive, after this next correction, the long play is very important for Malaysia and that's why I live here now!

Dont worry, there will be enough RE to go around at affordable prices as only a few will be ready to sell at the top (which is already here - maybe passed by a few months already) and make a play for the trough.

2-3 years down, 3-5 year sideway to slow recovery and then Asia will make its move...all around 2020!

Diffuse the property bubble before it is too late
Making a Point - By Jagdev Singh Sidhu

THE subject of property prices and financing has gathered momentum ever since news broke that Bank Negara is assessing the situation to determine if new measures should be instituted to cool down fast escalating property prices.

Lobby groups for the industry have been busy making their case heard, saying that any move to impose higher downpayments for houses would hurt the property market.

Their concerns come at a time as a growing number of people have complained that prices of houses, especially in the hotspots in the country such as the Klang Valley and Penang, are spiralling beyond affordability.

The last thing everybody needs is such speculation spreading to other areas where for the moment, speculative activity appears to be contained for the moment in the hotspots as 94% of houses sold in the country are priced below half a million ringgit and 85% of houses launched in the past nine months cost below RM500,000.

Dealing with speculation is tough and the last thing anyone should do is to make genuine buyers suffer, especially first time buyers.

Suggestions that houses costing below RM500,000 should not be subject to the new higher downpayment requirement makes sense.

Also first-time house buyers or owner occupied houses should be given the most ease of financing to allow them to fulfil the dream of owning a home.

It’s also hard to clamp down on speculative activity as the wealth creation process is an allure that developers, banks and policy makers might find hard to turn away.

After all, the money generated from flipping houses adds to the bottomlines of companies and the money in the hands of people could well filter down to other consumption activity that would go a long way to help spur economic activity.

But the profit from speculating activity, this time driven largely by cheap and ready financing, is unsustainable and history is full of examples of the dire consequences of a property bubble gone burst.

It’s then not surprising that the authorities in other countries in the region, where a property bubble has formed, are working hard to manage and diffuse the situation. Rules introduced in China, Hong Kong and Singapore are far more drastic that what the authorities here are reported to be contemplating.

In fact the new rules that are talked about are tame compared with what has been done in the past. In 1995, reports said that Bank Negara imposed a maximum 60% loan for residential properties priced above RM150,000 to put the brakes on the then fast rising house prices.

Furthermore, a real property gains tax of 30% was imposed on foreigners selling their properties irrespective of the holding period of the property.

Those measures were met with a huge hue and cry from the lobby groups, and developers who claimed that such draconian measures would maim the market. A couple of years later Malaysia entered its worst-ever recession, and as they say the rest is history.

The point is, just as the saying goes, those that fail to learn from history are doomed to repeat it, and for Malaysia, failing to deal with any property speculative bubble would spell trouble for the banks that have grown to rely more and more on households to drive their lending activity.

In the interest of financial stability and common sense, the move to act should be made soon.

http://biz.thestar.com.my/news/story.asp?f...88&sec=business