Bank Negara Curbs Property Bubble In Malaysia ?!

Posted by Kris | Tuesday, August 31, 2010 | | 10 comments »

Banks may not be in favour of a potential move by Bank Negara Malaysia to tighten mortgage lending rules unless it is limited to just high-end properties, analysts say.

It was reported that the central bank is seeking feedback from banks on the possibility of capping the loan-to-value ratio (LVR) for mortgages at 80 per cent to avert the risk of a potential property bubble. 

Currently, there is no fixed LVR. Banks usually lend up to 90 per cent of a house value, or even up to 100 per cent in some cases.

"Banks are unlikely to be in favour of it as it will affect their profitability," said a banking analyst at a local research house.

I think that even if Bank Negara imposes this rule on the overall general property market, it will be quite a damper on the ever-rising property prices in Malaysia particularly major cities like KL, Penang. And it will surely make it a very tough life for house flippers. It will reduces the chances of average Joes' aspiration of owning a property if prices continue to go up higher since this curb usually will not impact the super rich minorities.


One of the way to curb a property bubble is of course providing more affordable housing supply and growing sub-urban townships out from the heart of the major cities. This of course, requires good public infrastructure and facilities to encourage people to move away from densely populated area, thus reducing the heat in the property prices in certain areas.


Let's see whether this will happen or not for Malaysia.


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10 comments

  1. ChampDog // 12:24 PM  

    I heard somewhere that Singapore is also doing something similar. I think 80% is pretty reasonable, people will still continue buying house. :)

  2. Kris // 11:39 PM  

    Yeah..the move should curb small time house flippers.

    At least now, they recognize a potential bubble problem in the property markets.

    Property are always "perceived" as inflationary protected assets. This is not always so true by looking at what happened in the US.

  3. Kris // 11:36 AM  

    Looks like BNM will likely to really impose the restrictions after Singapore. A huge tendency to sell a property even before it is completed is tandem to speculation because the property might not materialized if the developer ran away.

    So those who want to buy houses, just wait for the prices to fall down :P

    Cash is King!!!

    Kris

  4. kampunginvestor // 11:50 PM  

    Cash is definately king! I also can't wait for the bubble to burst then we can buy cheaper houses and ride on the bull when it goes up again? ^^ Sounds greedy eh... ^^

  5. Kris // 1:07 AM  

    Haha..I guess those that is rich in cash surely would like another recession to happen to buy low.

    From the looks of the US market, another recession is quite likely as the economy is slowly deteriorating as the economic stimulus wore off.

  6. ChampDog // 11:22 AM  

    Not sure whether will burst or not? It might not happen.

    If really happens again, that is good too. Have been wondering if I should buy another house in Penang recently...

  7. ChampDog // 11:23 AM  

    Perhaps the worst condition for me to guess, it will just stay flat...

  8. Kris // 10:07 AM  

    I guess if you got a house at a good price, then it is worthwhile to buy in land scarce Penang.

    If you have the time to visit JB, you will be shocked that it is very common in every housing area ; around ~20%-30% has a owner but is abandoned/run down (probably cannot rent out, really what a waste to let it rot) regardless of whether it is a terrace house, bungalow or gated community!!! Talk about oversupply.

    JB used to have the hottest property market in Malaysia which one time surpasses KL. T.T

    Penang is like Singapore, however i think the prices are fueled by MNC employees there. Without MNC, i don't think it can be sustained. :P

  9. ChampDog // 11:18 PM  

    How about near to UTM? It is still oversupply?

    Yes, PG is a different case. MNC and also a lot of foreign investors too.

  10. Kris // 12:07 AM  

    Not sure about UTM area though. But nearby townships , the problem of abandoned housing is very common.