Bank Negara can still review policy on property loans

By A.F.

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Photo Credit: Google Street - This is what real low cost houses looks like in Malaysia

Bank Negara Malaysia has admitted there is an acute housing problem in Malaysia!

The Malaysian central bank recently released a statement regarding the housing situation in Malaysia, but it is the quotes from the Bank’s governor Tan Sri Muhammad Ibrahim on the problems faced in the property sector that is revealing.

He said that: “In 1Q17, total unsold residential properties stood at 130,690 units, and this is close to the historical average of 72,239 units per year between 2004 and 2016.”

According to BNM, 83% of the total unsold units were in the RM250,000 price category. Out of this, 61% were high rise properties.

A large number of unsold properties was due to the mismatch between the prices of new launches and affordability, he said, as reported by Malay Mail print edition.

It is clear that they know the fact that the general population can’t afford the houses that are deemed affordable.

Over the period of 2016 to 1Q17, only 21% of new launches were for houses priced below RM250,000, he said, adding that these launches were insufficient to match the income affordability profile of about 35% of households in Malaysia.

The low rate of homes sold in Malaysia can, however, be altered if the BNM could alter the course by them requesting banks to give more facilities to people.

To do that, it has to relax its rules, though it is adamant in saying that it has no idea how to solve the problem.

It can, and it will if the central bank were to alleviate the banks from its own rules that have tightened the loans application process in the first place.

When we look at the governor’s statement in Malay Mail, it is also clear that the central bank is aware of more than what it is saying: “These factors (elaborated above) resulted in median house prices being five times the annual median household income in 2016, rendering property prices to be “seriously unaffordable”.

We know that such a wide disparity between the supply and demand of affordable homes has worsened the imbalances in the housing market. TISG has reported such problems lately.

One of the factors reported by TISG is the unattractive location of some affordable housing projects due to factors such as distance from workplaces and low transport connectivity.

The BNM governor spoke about that too.

TISG also said some buyers prefer landed properties as opposed to high rise units and thirdly, the applicant registries maintained by the providers of affordable housing may comprise many non-creditworthy applicants resulting in delays in the allocation of affordable homes.

The BNM governor repeated that too, in his Friday’s speech at the Bank Negara Malaysia HQ in Kuala Lumpur.

He also noted that the mismatch was also exacerbated by the slow rise in income among Malaysians. TISG noted this element as one of the most crucial one in the problems plaguing the buyers in the country.

Hence, we believe Bank Negara can still review policy on property loans by as stated earlier, requesting banks to relax their tightening measures and let the facilities flow to people.

They can do this by also by pressing on the government (they are the ones who ‘advised the government to impose the GST’ it is said) to force local companies to increase salaries.

The reason we are saying this is because many companies are profiting from low wages in the country, declaring huge profits and huge dividends. All this on the back of the lowly paid workers!

It is unviable when the people’s salary is not increasing when everything else is increasing, it will only make this predicament worsen further in the next few years.

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