BY: JONATHAN ROBERTS
jonathan@propwall.com
Putrajaya’s decision to allow property developers to assist non-bankable home buyers afford a home, by acting as a moneylender, has attracted strong criticisms.
Urban Wellbeing, Housing, and Local Government minister Tan Sri Noh Omar, asserted that this initiative is favourable to property developers and home buyers alike.
Real Estate and Housing Developers’ Association Malaysia (Rehda) has welcomed the idea, believing that it will boost developers’ sales in this sluggish market. According to the National Property Information Centre (NAPIC), 23% of the 81,894 residential and commercial units launched in the first quarter of 2016 remains unsold.
Whilst property developers show their support, it is worth noting that only developers with a robust balance sheet can risk their resources to finance home buyers. Rehda president Datuk Seri Fateh Iskandar Mohamed Mansor insists that most developers are incapable of offering 100% financing.
The prospects of owning a home is no doubt exciting, but the public’s sentiment is still up in the air over this decision. The unhealthy interest rate — 12% with a collateral and 18% without — is a cause for concern. Higher interest rates simply mean higher property prices for home buyers.
On top of that, the National House Buyers Association (HBA) has expressed their fear that the developers will seek the government’s intervention, should home buyers default.
Critics of the move say that this easy credit may propel a housing bubble, thus risking the creation of a subprime crisis, similar to the one which occurred in the USA from 2007 to 2009.
According to another media outlet, Axis REIT Managers Bhd head of investments Siva Shanker is also sceptical about this scheme, expressing that this will only exacerbate the high household debt ratio.
Bank Negara recently announced this year that Malaysia’s household debt-to-gross domestic product (GDP) ratio grew to 89.1% as of 2015, a figure which is almost doubled since 2008.
