Watchout: Harder To Get Property Bank Loan Next Year, 2012

Posted by Kris | Tuesday, November 29, 2011 | | 2 comments »

A big sword looming for the property market in 2012?


For those that wants to get a property for investment purposes, Bank Negara new ruling implementation in 2012 is really going to make it tough to get loans to do leveraging in property. Only the cash rich can play property next year as BNM reigns in to curb "unhealthy" property prices among the over-leverage groups. (middle group incomers) 

I think Bank Negara has a done a good job this few years to implement steps to cool down the rising prices. At least they don't flip flop in their rulings which is really hazardous to the economy. Kudos to them!!

Bank Negara even capped the car loan to 9 years! (although this N/A to most people).


IMHO, i think this latest move will prove very effective provided it is being implemented stringently. Bank Negara cannot afford to increase interest rates or the BLR with the current weakening economy. This could retard growth as genuine business owners whom are seeking loans to expand/start businesses will be also be impacted.


Some neighboring countries already starting to lower their BLR in anticipation of a weaker global economy next year ,2012. Imagine if the BLR is lowered down without this requirement in place, it would encourage more people to pour their money into properties.


So what is the implication of this move next year? Here are a few scenarios to ponder upon.


1. Local stock market will rise since now the money is flowing into it instead of the property market. This of course provided, the global economy is still vibrant and the Euro crisis resolved firmly. And hopefully, China does not implode.


2. Property prices will drop since now the demand has been stemmed by tougher property loan eligibility imposed to all the banks. You might need to cough up more cash upfront to convince the banks to loan you more money to buy your investment property. (especially if it is your 2nd, 3rd, etc ) This is akin to a stock counter being designated, where you need to pay cash upfront to buy a stock. Just take a look at Harvest. The stock price plummet like a waterfall after being designated. 


3. Rental prices increased since now not many people afford to buy houses, even their first property?! I hope Malaysia does not suffer the scenario similar to S.Korea where most people are renting due to high property prices.


I noticed that lately there is a lot of paid property investment seminars being promoted aggressively throughout Malaysia. Looks like 'everyone' (some even without any track record) is jumping on the seminar bandwagon. Is it a sign on the wall?? I am not against paying but just don't blindly pay for seminars without first doing some thought & research especially on your own current financial standings. You need money to play this leverage game. You need to KNOWTHYMONEY & KNOWTHYSELF..lol.. Hence the point below. 


Something to ponder about: Property investment USED to be EASY because you can easily apply loan and achieve high leverage. And quickly do some flipping to earn the quick cash. (For a futuristic view on how it will turn out to be in the long run, just google "US property crisis" :P . This is something Bank Negara is trying to prevent, a repeat of history) That is the KEY to property investment if you really think deep enough. Easy access to high loan leverage against your income.  


If that is not easily achievable, I wonder what THINGS YOU DON'T KNOW that these property gurus can teach you?? Perhaps ways to increase your income..hmm..that would need another paid seminar. 


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2 comments

  1. Angie TLC // 12:09 AM  

    Hi Kris, good article. But whats the next ruling gonna be, do u have an idea?

    On the loan or stamp duty or what?

    I'm a msian migrated to SG but kept abreast of msian property scene because i've a portfolio of properties there myself. So if more and more can't afford to own properties, will the rental yield increase? Based on demand & supply theory it would right?

  2. Kris // 6:17 PM  

    Thanks, Angie for dropping my blog and good questions.

    I not sure what steps Bank Negara will take? Perhaps a stress test on all local banks.That would be interesting and certainly the result might impact the KLCI heavily. So far , I don't hear any stress testing on Asian banks.

    If you look around, there is a-lot of empty condos, that were bought for investment purposes. Most people hold them to flip, hence they are lazy to even rent it out. These are the strong hands. Rental prices might become competitive, if their hands weakened and decided to rent it out as the economy worsens. Hence, supply will increase.

    I think rental yield right now is not so good unless you manage to buy cheap or managed to get an expatriate who is willing to pay a premium.

    Another key to property investment is holding power aka the ability to service your monthly payment either through getting some "subsidies" from rental or paying it through your own pocket.

    Property flippers tend NOT to rent out their property since they might get a good offer but unable to kick out existing tenants due to contract. :)

    The biggest danger on a weakened economy is this: Buying unfinished /uncompleted/progressing development. You might get left in the lurch and be in huge DEBT since Malaysian housing laws don't favor house buyers.