Housing Loan Cap: The First Salvos

They showed their vehemence demonstrably to Bank Negara Malaysia's proposal to cut housing loan quantum from 90% funding to 80%.

The reason for their opposition: They believe it will will only discourage Malaysians from buying houses as it will deter potential house buyers who have to bear the brunt of forking out an additional 10% of the house sales price.

The groups that are in opposition are chiefly, the National House Buyer’s Association (HBA) and Federation of Malaysian Consumers Associations (Fomca).

HBA secretary-general Chang Kim Loong said the proposal would go directly 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.