We have the Best Home Loan in Town! Reality or Myth?

 

I went to attend  iProperty.com Expo talk  called ”Banks vs Mortgage Brokers-A Better customer value proposition” on 26 July 2008 at KLCC Convention Centre, KL.

Here is a couple of tips shared by the Mr.Adrian Un, Sales Director of Mortgage Broker Sdn Bhd:

  • It not uncommon to read “We have the Best Home Loan in Town!” Is this  Reality or Myth? Always read the fine print and hidden cost of the advertisement offer. If the rates is  low then maybe you have to fork out more on other things like  legal, stamp duty fee etc. No matter how good the deal look like remember that Bank is a profit making business entity.  
  • Do not just take Verbal promises and always ask for written confirmation to avoid misinterpretation or mis-sell by sales officer. They may just highlight the good points and do not reveal the minus point about the package. If you work in Sales line before you will known what I am talking about.
  • Read each and every word of the Loan letter offer and if not sure always check with your lawyer. If you just simply signed then you may sign YOUR LIFE AWAY! It will easily effect your financial health for another 10 years or more.
  • The bank rates is always negotiable especially when your loan amount is high. Whatever advertise in paper is public rate. Ask the sales officer if you think you deserve a better rate. What is the cost of ASKING?
  • Check the Penalty Clause which is normally located on the 3rd or 4th page of the offer letter. Penalty Clause means the bank will charges some fee if the loan is fully pay before the contracted period.. Most bank loan have 5 years penalty clause upon disbursement which mean if fully settle before 5 years then penalty would be applied. The rational is majority of your loan installment will be offset more on interest compare to the loan principal in the first 5 years. Make sure get a loan that the penalty clause start when the loan first disburse and NOT on full disbursement. Imagine if you home is under construction for 2 years and the penalty clause stated it will start after FULL disbursement then technically the Penalty Clause period is longer than 5 Years!
  • Choosing a housing loan by its nature is difficult enough. Face it, how many of us can calculate your repayments given the loan amount, the tenure of the loan and the interest rates? How many of you can tell the advantage of one loan over the other based on the different applicable interest rates? Use Mortgage Brokers services if you wanna save time and not familiar with the process of obtaining loan. A mortgage broker is a match maker between a borrower who is interested in seeking loan and a lender, ie, bank or financial institution. The broker draws from a pool of various lenders to find the right match for the borrower.

The use of Mortgage Brokers services is FREE! Brokers are paid by their panel banks and financial institutions. The fee payable to the brokers does not increase the interest rates and fees payable by you to the bank or financial institution. You pay the same interest rate and fee, regardless whether you obtain the loan package concerned through a broker or direct from the bank or financial institution

24 Responses to “We have the Best Home Loan in Town! Reality or Myth?”

  1. MaxiHome, MaxiShop from Maybank
    —————————————

    MALAYAN Banking Bhd (Maybank) (1155) has launched two new mortgage packages that will fix interest rates in the first few years of buying a house or commercial property.

    This means that borrowers will not have to worry about swings in the base lending rate initially, and they can better plan their cash flows.

    The new MaxiHome and MaxiShop fixed-rate packages will fix rates for the first few years, running for as long as 10 years.

    “These two exclusive packages are offered from January 1 2010 to June 30 2010,” Lim Hong Tat, Maybank’s senior executive vice-president and head of consumer banking said in a statement.

    The fixed-rate interest for the first three-year tenure for MaxiHome is 3.75 per cent, 4.85 per cent for the first five-year tenure and 5.88 per cent for the first 10-year tenure.

    There are also other benefits for these packages. Among them, borrowers have the option to pay half of the original loan and defer the rest of the payment until the end of the loan period.

    They could also choose to pay just the interest in the first five years or extend the repayment period to 40 years.

    “The interest rate-based fixed years tenure will give them peace of mind against interest increase to provide them with better financial planning and cash flow management,” Lim added.

    The new Maxi Mortgages will be introduced at the iProperty.com Expo, to be held at the Mid Valley Exhibition Centre from January 1-3.

    Maybank is the main sponsor and exclusive financier for the exhibition.

    from:btimes.com.my/Current_News/BTIMES/articles/MAYNEW/Article/

  2. Mortgage or loan term insurance

    IN times of old, when we buy a property, it was meant for stay, as the term owner-occupied. Slowly, this was extended, when people bought properties for investment purposes. Realising this venture as a business, financial institutions, which usually finance these investments, started assessing the risks associated with it. Hence the birth of the loan or mortgage related insurance coverage.

    Today, in Malaysian there are two main types of housing loan related insurance coverage, called MRTA (mortgage reducing term assurance) and MLTA (mortgage level term assurance). The former was the first to be offered, but both protect the loan borrower against death or total permanent disability (TPD). Basically, in the event of loss of life or TPD (or in some instances also covering critical illness, depending on the terms) the policy will cover the remaining payment obligation due under the housing loan to the bank.

    The main differentiation factor lies in the offerings and coverage categories, whereby MRTA acts like a life insurance, the premium is lost in the end, but for MLTA it acts as a term policy, whereby there is cash-back in the event of no claim. Furthermore, the MRTA is a reducing balance coverage, that pays back in accordance with a reducing balance schedule, and at the end of the tenor the payable sum is zero. This is not the same for MLTA whereby the coverage is fixed from start, meaning the person gets cash-back mounting to the sum insured.

    While it is easy to see, which options stands out the better, we need to further analyse two more factors. Firstly, it involves the fact that the premium for the MLTA is much higher. This can go to 10 times higher in totality compared to a MRTA premium. Which brings us to the second factor, which is the purpose. The purpose of the home mortgage insurance, if we can remember, is to cover us against TPD and death, whereby our family is not burdened with the financing. If we seek to find a reasonable cost approach and in the MRTA instance, to be financed by the bank via lump sum payment capitalised into the loan, then the choice is obvious.

    Let us take an example in order to show the details. Thirty-year old Vaniza Carlos is buying a RM125,000 property, and is taking up a 30-year term 80% loan financing package. She is faced with the option of choosing a loan insurance package, and her friendly insurance agent Cryced sets out the terms as per Table 1.

    Which will be your pick?

    Just for analysis purposes, in order to equate the total cost of the MLTA to current value (to bring it to MRTA equivalent), using the NPV approach at 10% discount rate (method of derivation which was featured in my previous article), the NPV value works out to about RM9,950, which is effectively only about 3 times higher than the cost for MLTA. Year 2020 is 10 years into the loan agreement, where the outstanding loan sum would have reduced to about 75% of original sum.

    Nevertheless, under the bancassurance umbrella, there are many types of term life policies which are not directly linked to the property but offers similar risk coverage. Bancassurance is defined as insurance business being provided by banks of financial institutions. This term was coined after banks started merging with insurance companies, and in combination started offering products with dual, loan and risk coverage facilities, among others. But do be careful, as MRTA and MLTA usually covers main critical illnesses (albeit limited from the full list of known 36 critical illnesses), whereas term life policies differs.

    It is interesting to note that banks are now insuring this “business venture” or property investment, and if this can be extended to say a business of setting up a restaurant with an initial cost of RM100,000, with the same terms being applied. Food for thought, isn’t it?

    Raymond Roy Tiruchelvam … “I forget what I was taught, I only remember what I learnt” is a business planner with SABIC group of companies

    fr:starproperty.my/PropertyScene/TheStarOnlineHighlightBox/5198/0/0

  3. There may be a price war to give out cheaper bank loans
    By TEE LIN SAY

    KUALA LUMPUR: There may be a new round of price war among banks for consumer loans, with the new mortgage rate going down to as low as base lending rate (BLR) -2.3%. The current BLR rate is 6.3%.

    Some analysts said this comes as a surprise to the market after a mutual understanding was reached earlier to set a minimum rate of BLR-1.9%.

    The new mortgage rate is now down to BLR-2.2% since end-July and some banks have started offering BLR-2.3%.

    A home loan officer from CIMB Bank Bhd told StarBiz that housing loans have been revised downwards.

    “Previously we were offering BLR-1.9%. Now, we are revising the rate to BLR-2.1%. We had been losing some market share to foreign banks and decided to join in the price war,” he said.

    The BLR is a minimum interest rate calculated by banking institutions based on a formula which takes into account the institutions’ cost of funds and other administrative costs. The BLR is measured against the overnight policy rate (OPR). This year, Bank Negara has raised the OPR by 75 basis points in three rounds of rate hikes points to 2.75%.

    This means that the BLR also goes up by 75 basis points to 6.3% currently. The BLR is one of the major components used by banks to determine the pricing of home loans.

    StarBiz called up the customer service departments of some of the major banks for verification. While rates change depending on the mortgage taken, some banks have become very aggressive in their rates.

    It appears that CIMB’s rate is now BLR-2.1%, Hong Leong Bank Bhd is BLR-2.3%, OCBC Bank (M) Bhd is BLR-2.3% and UOB Bank is BLR-2.3%.

    While the website of Malayan Banking Bhd shows that it is offering BLR-1.8%, one of its home loans officers contacted said it could offer up to BLR-2.2% depending on the loan taken.

    “The price war has also spilled over to credit cards, with offers to absorb the government annual service tax. This was previously borne by card holders,” said an analyst from UOB KayHian.

    The analyst added that the start of government infrastructure projects and robust property launches would drive business loan demand in the second half, in time to mitigate the impact from slower external trade.

    Business loan is now 44.7% of total loans as at end of July 2010.

    Property brokers agree that the outlook for the property sector has been improving.

    Zerin Properties CEO Previndran Singh has a “neutral to positive” outlook on the property sector in Malaysia.

    “Prices are not moving up as fast, but interest is returning. Yes, there are issues of products being mismatched, but they are not big issues,” he said.

    A real estate agent from Reapfield Properties Sdn Bhd said interest in Malaysian property was moderate. People were adopting the “wait and see” attitude because of the rising interest-rate environment.

    However, she said there was “lots of interest in our properties below RM2mil”. There was less movement among the higher end homes.

    She added that her client list included foreigners from Singapore who were keen to invest in Malaysia due to its affordability.

    The UOB analyst said banks’ net interest margin was expected to trend up again after Bank Negara made another 25 basis points hike to the overnight policy rate on July 8. Average lending rate inched up to 5.19% in July from 5.05% in June.

    This impact might be offset by the new round of price war among banks for consumer loans.

    Loan growth fell from 12.5% in June to 11.9% in July due to higher repayment by the real estate and finance sectors. Consumer loans remained the driver on resilient demand for big-ticket items

    The banking system’s capitalisation remained strong with risk-weighted capital ratio and core capital ratio sustained at 15.1% and 13.2% respectively.

    The level of non-performing loans including impaired loans remained stable, accounting for 2.1% of net loans. Loan loss coverage was stable at above 90%.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/9/1/business/6952770&sec=business

  4. No to 80% mortgage cap on housing
    By ONG HAN SEAN

    PETALING JAYA: Several groups are up in arms over a proposal to cut housing loans by 10% from the current cap of 90%, saying that the move will only discourage Malaysians from buying houses.

    National House Buyer’s Association (HBA) and Federation of Malaysian Consumers Associations (Fomca) cautioned that the proposed home loan reduction to 80% would only be a burden to potential house buyers.

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

    fr:thestar.com.my/news/story.asp?file=/2010/9/6/nation/6987500&sec=nation

  5. Consumer banking will continue to be an important revenue generator of banks
    By DALJIT DHESI

    PETALING JAYA: Consumer banking will continue to be an important revenue generator for banks with home loans being one of the major areas of focus amid the prevailing relatively low interest rates.

    Apart from home loans, the other sectors in consumer banking which banks are focusing on to beef up their revenue streams are car loans, credit cards, personal loans and wealth management. Loans for the purchase of residential properties currently account for more than 50% of consumer loans.

    RAM Ratings head of financial institution ratings Promod Dass said the relatively low interest rate environment had fuelled consumer lending, which represented more than half of the banking system’s loans.

    He said that gauging from the trends in monthly loan approval data, residential property lending continued to accelerate.

    end-2009, he said home loans represented 25% of the banking systems approved loans figure, contrasting against 16% as at end-2007. He added that this momentum had persisted to date. As at June, home loans comprised 27% of the system’s total loans.

    “While there is no publicly available data to differentiate owner-occupied versus speculative home purchases conclusively, the rapid build-up of home loans over the last few years if unchecked, could lead to a credit bubble.

    “Less of a concern at this point would be the purchase of passenger cars, personal loans and credit cards segments which make up 14%, 5% and 3% respectively of total loans. Given the positive economic traction, it is very likely the lending focus of most banking groups will still be aimed at the consumer segment well into 2011,” he told StarBiz.

    He said even though competitive pressures had thinned margins on consumer loans, banks still viewed this segment as lucrative on a risk-adjusted basis.

    Malaysian Rating Corp Bhd vice-president and head of financial institution ratings Anandakumar Jegarasasingam said the main challenge for banks would be to ensure the asset quality of household loans.

    Although the household sector’s non-performing loans ratio had been on an improving trajectory (June 2010: 2.5%; December 2009: 3.1%; December 2008: 4.1%), he said the household sector’s debt burden had also been steadily increasing, partly due to greater appetite for borrowed funds and also as a result of strategies deployed by banks.

    Anandakumar voiced some concern over banks relying too much on household loans, saying that it might create funding bottlenecks for emerging businesses vital for the Malaysian economy to attain its full potential.

    Consumption-oriented personal loans, he said, did not necessarily add to the productive capacity of the country and might defeat Malaysia’s aspiration of becoming a high-income nation. Instead, funds should be directed towards strengthening the productive capability of the country, he said.

    Ernst & Young Malaysia partner (Assurance) Chan Hooi Lam foresee consumer banking facilities like car loans, purchase of residential properties and credit cards to continue its growth momentum into next year.

    He expected more customised and personalised services to be offered by banks as part of their strategies to protect and increase their market share in consumer banking.

    This include serving special needs of the growing younger generation, younger professionals, private banking and wealth management. The other types of loans he said that had seen the growing trend include those relating to personal use as well as education and health.

    Consumer banking business is one Citibank Bhd’s growth drivers, according to its head of consumer market Fabio Fontainha. The main focus for this business for the bank is credit cards, wealth management and mortgage.

    He said he expected the bank’s consumer banking segment to post a double-digit growth in revenue this year, adding that for the first half of the year the segment had performed better than the corresponding period last year.

    The bank anticipate this growth to be supported and boosted by its recent marketing campaign “Powered by Citi”, and continuous investment in people, product value proposition and client services.

    “We expect our three key segments – mortgage, credit card and wealth management divisions – to deliver positive growth and the bank’s consumer banking to continue its growth path into next year,” he noted.

    He attributed the success of its mortgage business to the quality of promotional packages offered, flexibility of mortgage product features and timeliness of loan approvals.

    On the credit card side, he added although there had been a reduction of credit card accounts in the market due to the implementation of service tax, nonetheless, the bank’s sales and usage performance had been good judging from positive response from consumers to its new and re-launched products.

    Fontainha said Citibank was currently the market leader in the credit card industry with a 20% share of credit card usage.

    He viewed wealth management as one of the long-term growth opportunities for consumer banking as the expansion of the country’s middle-class would allow clients to invest their assets more effectively beyond deposits.

    OCBC Bank (M) Bhd, which registered strong double-digit growth year-on-year for its home loans portfolio, expects this trend to continue for the rest of the year.

    Head of Consumer Financial Services Charles Sik said that apart from home loans all sectors under consumer banking were important in building a wholesome consumer franchise.

    “This explains why our investments are into building a better branch network, investing in a new core banking system, people (especially in sales) and Islamic banking.

    “We do not focus on any one particular growth sector as banking itself represents a growth sector with the demographic of a young population getting urbanised and into the workforce in the next 10 to 15 years, Sik added.

    RHB Banking group director of retail banking Renzo Viegas said that apart from credit cards, the focus would also be in debit cards as the bank saw tremendous growth potential in this area.

    He added there was continuous growth in debit card spending amid active marketing campaigns promoting debit card usage as a safe and convenient alternative to cash.

    Morgage loans would remain the key focus for the bank in view of increased demand for housing, stable local economy environment, attractive home ownership plans as well as low financing cost.

    Consumer banking, as a whole, currently contributes about 44.7% of the bank’s revenue, he noted.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/9/6/business/6911439&sec=business

  6. Reduce loan to 80% for homes over RM500,000 only

    PETALING JAYA: The proposal to cut housing loans by 10% from the current cap of 90% should only be imposed on houses costing over RM500,000, said MCA president Datuk Seri Dr Chua Soi Lek.

    He said this was to ensure that the low and middle-income groups could afford to own houses.

    “Buyers who purchase houses below RM500,000 should be allowed some flexibility in choosing whether to take the proposed 80% or the original 90% loans,” he said in a press statement yesterday.

    A flexible loan cap based on house prices, Dr Chua said, would better protect house buyers, although the proposed loan cap would help stabilise house prices especially in some parts of the Klang Valley and Penang.

    “I urge Bank Negara to conduct a thorough study before implementing the new measure to ensure healthy growth in the housing industry,” he said.

    Deputy Finance Minister Datuk Donald Lim Siang Chai said the Government would not rush into a decision on the proposal.

    He said the Government would collect more views and suggestions from various groups on the proposal, which was floated by Bank Negara as a way to curb excessive speculation on property prices.

    “We are willing to listen to more views from concerned groups, including potential house buyers and stakeholders, because people have different opinions of the proposal.

    “We will study the views before making a final review to the existing guidelines,” he said, adding that the Government had no plans to make any adjustment yet.

    Several groups, including the National House Buyers’ Association and the Federation of Malaysian Consumers’ Association (Fomca), had cautioned that the proposed loan reduction to 80% would only be a burden to potential house buyers.

    They said such a proposal would go against the Government’s plans to encourage home ownership.

    fr:thestar.com.my/news/story.asp?file=/2010/9/7/nation/6992959&sec=nation

  7. Unclear how loan-to-value ratio will impact loans growth
    By FINTAN NG

    PETALING JAYA: The impact of any lower loan-to-value ratio (LVR) for mortgages on the banking system loans growth is still unclear, but analysts do expect loans growth to take a hit if the measure is pushed through.

    Kenanga Research, in a report, said if measures to cool the property market were implemented, a move that is being studied by Bank Negara, there could be a negative impact on mortgage applications.

    The research house said that the consumer segment was still “the sole driver for banking system loans growth” based on Bank Negara’s monthly statistical bulletin for July.

    It said there were signs of a slowing down in loans growth, with growth in the business segment unsustainable compared to the strong performance earlier in the year.

    “Going forward, we’re cautiously optimistic about the outlook of loans growth from the business segment with the easing of the business loan momentum,” it said.

    It was reported last month that the central bank was exploring possible measures to curb excessive speculation on property prices by having a cap on the LVR to 80% from 90%.

    TA Securities Holdings Bhd analyst Wong Li Hsia told StarBiz that the impact to loans growth would really depend on the manner of implementation.

    “There will likely be an impact but we don’t know at this point how serious it will be as Bank Negara has yet to issue any guidelines on how it’ll be implemented,” she said.

    According to other analysts, preemptive measures would only have a temporary effect on speculation as buoyant consumer sentiment and demand for good locations were expected to sustain property prices.

    They said based on last October’s imposition of the 5% property gains tax, there could be a “short-term knee-jerk reaction” where demand cooled off for a while and property buyers became more discerning.

    CIMB Investment Bank Bhd research head Terence Wong had suggested in an earlier report that should the measure be implemented, it should be on landed residential properties where prices have surged in certain locations instead of across the board.

    However, HwangDBS Vickers Research analyst Yee Mei Hui said in a note yesterday that blanket measures were unlikely to be imposed given the differing level of speculation in the various segments of the property market.

    “We believe first-time and mass residential buyers may be spared (similar to regional markets),” she said, adding that properties below RM500,000 constituted 94% of last year’s transaction volume and 68% of value.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/9/7/business/6989481&sec=business

  8. Chor: Cap may dampen property market

    KUALA LUMPUR: Any move to cap housing loans at 80% instead of the current 90% can dampen the property market in the long run, said Housing and Local Government Minister Chor Chee Heung.

    He added that he would leave the decision to Bank Negara.

    “We will give input if asked,” he said during a briefing on the Zephyr Point project completed based on the build-then-sell concept yesterday.

    Chor said a large percentage of purchasers were genuine buyers and Bank Negara should consider the suggestion that the 20/80 proposal be imposed only on houses costing more than RM500,000.

    The Star on Monday reported that several groups, including the National House Buyers’ Association, cautioned that a proposal by banks to cap housing loans at 80% would turn out to be a burden to potential house buyers.

    MCA president Datuk Seri Dr Chua Soi Lek on Tuesday suggested that the 80% proposal should only be imposed on houses worth more than RM500,000 – to allow more buyers the flexibility of choosing which loan amount best suited them.

    Deputy Finance Minister Datuk Donald Lim assured the public that the Government would listen to views from concerned groups and study feedback before making a final review to the existing guidelines.

    On another matter, Cho said the ministry was looking for developers to help revive 47 abandoned housing projects nationwide.

    He added that last year, there were 151 abandoned projects.

    The ministry together with the Real Estate and Housing Developers’ Association Malaysia (Rehda) had done its best to get the projects revived.

    “We are still looking for suitable developers to revive the remaining projects,” he added.

    Chor said abandoned projects tend to occur to property costing less than RM150,000 when developers are not able to bear the rising cost of materials.

    He said the ministry had encouraged the build-then-sell concept to cut down on cases of abandoned projects.

    Since 2008, the incidents of abandoned projects had also fallen drastically due to changes made to the Housing Developers Act.

    fr:thestar.com.my/news/story.asp?file=/2010/9/8/nation/6996189&sec=nation

  9. Housing cap is just a proposal, stresses Husni

    IPOH: Bank Negara is merely carrying out a study on capping housing loans at 80%.

    Second Finance Minister Datuk Seri Ahmad Husni Hanadzlah said Bank Negara will study any possible impact on the housing sector before making a decision.

    Speaking to reporters during a Hari Raya open house hosted by him, Husni said the demand for houses is high.

    “I believe Bank Negara will take this into consideration,” he added, noting that the proposal might stem from a property bubble currently emerging in China.

    It was reported that Bank Negara was engaging with banks on possible measures to curb excessive speculation in the property market.

    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% or even 95% of the value of a property.

    fr:thestar.com.my/news/story.asp?file=/2010/9/12/nation/7022877&sec=nation

  10. 70% loan for third and subsequent houses?
    By ELAINE ANG

    Talk of a lower financing ratio has surfaced, but no decision yet

    PETALING JAYA: There is speculation that the loan-to-value ratio for the third and subsequent house purchases could be further reduced to as low as 70% from the assumed rate of 80%.

    According to sources, talk of a loan-to-value ratio of 70% has surfaced but nothing has been decided yet and discussions are still ongoing

    To recap, Prime Minister Datuk Seri Najib Tun Razak had said on Tuesday that Bank Negara might impose a limit on financing for subsequent purchases after the second property while first-time buyers can borrow up to 90%.

    It is reported that there were plans to lower the loan-to-value ratio for the third and subsequent house purchases to 80% from 90%.

    The move is aimed at curbing speculative property transactions in a bid to contain escalating property prices.

    SK Brothers Realty Sdn Bhd general manager Chan Ai Cheng said a reduction in the margin of financing to 70% would affect property sales for investments initially.

    “There will be an impact on the property market. The more aggressive and gung-ho property investors may think twice about investing in properties if they have to cough up more money.

    “For example, a buyer who will have to pay RM50,000 deposit for a half a million ringgit property will now have to come up with RM150,000,” she said.

    That said, Chan admits that most investors would have surplus cash and not overgear themselves by taking a maximum loan when buying a property.

    “As with any new ruling, the market will have to adjust itself and find a new level,” she said.

    She suggested that the central bank should look at a lower loan-to-value ratio for properties that were more prone to speculation and not impose the rule across the board.

    An analyst with Affin Investment Bank said the loan-to-value ratio curb may not be imposed on the entire property industry, hence it should not affect the demand and sales of properties except perhaps in selective locations/projects with a higher rental market.

    “However, the guidelines do not appear specific at the moment.

    “There are also ways a purchaser can play around them.

    “We may not see a sharp pullback in terms of property sales and banks’ mortgage growth to be impacted badly,” she said.

    The analyst said more stringent measures, such as regulating the discount on base lending rates (which is currently at 1.8% to 2.2% in the market), barring interest-only payments or the absorption of interest cost by developers during the construction period would have a more drastic impact on property sales and loans.

    Other measures include increasing stamp duties or real property gains tax rather than imposing a cap on the loan-to-value ratio or even lowering the cap to 70%.

    According to AmResearch’s sensitivity analysis, bank earnings are not so sensitive to changes in loan growth.

    “We estimate that every 1 percentage point downgrade to our loan growth assumptions will lead to less than 1% downgrade in net earnings,” it said in a note yesterday. Thus, potential moves to reduce the loan-to-value of property related loans would not lead to any major downgrades to net earnings, AmResearch said.

    A bank official who declined to be named said most of the bank’s mortgage borrowers were buying residential property for their own stay and the proportion of borrowers who were buying such property for speculative purposes were small.

    “Hence I don’t see the loan-to-value curb significantly hurting our business. We also check the credit profile of our borrowers before deciding on the loan amount so if a customer’s credit rating is not so good we will reduce the loan amount accordingly,” he said.

    According to Bank Negara statistics, outstanding loans growth for the banking sector grew 11.9% to RM841.74bil in July year-on-year.

    Mortgages make up the largest portion with some 26.8% of the total loans outstanding as at end July.

    The National House Buyers Association honourary secretary general Chang Kim Loong said a lower loan-to-value ratio for the third and subsequent house purchases was welcomed.

    He said property speculators have caused property prices to escalate throughout the years.

    “I would like to suggest that the loan-to-value ratio should be even lower, at say maybe 50%, so that those without upfront cash will not speculate on properties and deprive the genuine buyers from buying a decent house,” he said.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/9/24/business/7091058&sec=business

  11. Loan-to-value cut will deter speculative buying
    By ELAINE ANG

    PETALING JAYA: The potential reduction in the loan-to-value ratio for the third and subsequent house purchases to as low as 70% will bite into property speculation activities as well as banks’ loans growth and earnings to a certain extent, analysts said.

    A property analyst said a loan-to-value ratio of 70% would wipe out some speculative buying in the property market.

    “It will be significant, especially for the high-end and high-rise residential property segment, as this segment typically attracts more speculators.

    “Banks which traditionally have exposure to such loans will be affected if this ruling takes place,” she told StarBizWeek.

    To recap, there is speculation that the loan-to-value ratio for the third and subsequent house purchases could be further reduced to as low as 70% from the assumed rate of 80%.

    This followed Prime Minister Datuk Seri Najib Tun Razak’s comments on Tuesday that Bank Negara might impose a limit on financing to 80% from 90% for subsequent purchases after the second property while first-time buyers can borrow up to 90%.

    The move is aimed at curbing speculative property transactions in a bid to contain escalating property prices.

    An analyst with a local stockbroking firm foresees slower loans growth for residential mortgages if the loan-to-value ratio of 70% is implemented.

    “This could result in more competition among banks, with some resorting to giving more discounts on base lending rates thus affecting net interest income and earnings.

    “Assuming a 1% drop in residential mortgage growth, banks may suffer a less than 1% drop in net profit,” she said.

    Nevertheless, she said the impact might not be very significant as the number of property speculators buying third and subsequent houses in the market was small compared with genuine buyers.

    “Most banks actually have mortgages to genuine buyers in their books rather than to speculators,” she added.

    The analyst said hypothetically, banks with the biggest exposure to the residential property sector would be the most affected by a lower loan-to-value ratio.

    According to statistics, Alliance Financial Group Bhd has the highest exposure to the residential mortgage segment, representing 39.4% of its loan book. This is followed by Hong Leong Bank Bhd with 38.7% and Public Bank Bhd 27.9%.

    The analyst, however, stressed that the quantum of effect would depend on how much of the residential loans was given out to speculators as opposed to genuine house buyers.

    “Then again, most banks tend to be pretty prudent and may already have a stringent credit policy in place when it comes to lending to borrowers who are not buying residential property for their own stay.

    “If this is the case, then the loan-to-ratio of 70% would not have an impact on them,” she said.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/9/25/business/7100627&sec=business

  12. Low interest rate, easy credit give rise to speculation
    COMMENT
    By THEAN LEE CHENG

    EARLIER this year, a relative of mine managed to sell his Bukit Sentosa house after four years. Its closest town is Rawang.

    He decided to relocate back to Petaling Jaya. But property prices have gone up so much that he now has to rent. In his late 40s, he hopes he does not have to go on renting.

    But even if he were to get a suitable place, there may be problems with financing because of his age.

    This relative belongs to a group of people who will be retiring soon but who do not yet have a roof over their heads. He is what developers and bank officers would call “a genuine house buyer.”

    With property prices going up since the second half of last year, what are his chances of having his own home? Dicey.

    Therein lies the problem in today’s property market. On one hand, there is the low interest rate. On the other is easy credit. Yet both are not helping him.

    On the flip side, it is encouraging many to speculate. These two factors – low interest rates and easy financing – are supported by various schemes that are being promoted by developers.

    Among the most popular is the 5/95 scheme, or variations of it, which started early last year. A buyer merely pays 5% of the price of the house and does not have to pay anything until he takes the keys. All interest payments are “absorbed” by the developer (Psst! The interest is priced into the value of the house).

    Some schemes do not require mortgage payments until the sixth year of purchase. One developer requires a downpayment of only RM5,000 and no more because it also offers a 10% rebate, which buyers can “use” on signing the sale and purchase agreement.

    No payment is required until completion of the property and this RM5,000 is used to pay for utility deposits and maintenance deposit. Whatever is left is “refunded” to the buyer. Such schemes encourage speculation.

    While Singapore has banned them, developers here are still rushing to launch their projects using this form of financing. Early this week, there were talks of increasing down payments to 20% or even 30%.

    While this will not weed out speculation completely, it will serve as a deterrent. Such a move will also help the banking sector indirectly.

    Out of every loan approved by banks today, one-in-three to one-in-two is a property-related loan. This compares with one-in-five prior to the 1997/98 Asian financial crisis.

    With such a huge exposure to the property sector, in the event prices become unsustainable, the banking system will be adversely affected.

    At the beginning of the 21st century, US banks gave loans to home buyers who would normally not have been given credit.

    These borrowers were allowed to buy houses by paying slightly more than normal rates, often with floating interest rates that rise and fall with the general market. The relaxing of credit standards led to ever-increasing house prices.

    Many bought homes they could not afford, but assumed that the rising property market would help to cover their loan commitments, which would allow them to refinance later on, once the value of the house climbs up.

    When the bubble burst, house prices fell and so did the banks. This became what is currently known as the US subprime mortgage crisis.

    With today’s easy credit and these 5/95 and 10/90 schemes, something similar seems to be happening here in Malaysia.

    There is also the absence of housing between the RM250,000 and RM300,000 price range. Even a studio apartment of about 650 sq ft can cost about half a million ringgit.

    Developers justify their penchant for building high-end launches with the rising cost of building materials and the desire for lifestyle living. Not every one is seeking after that dream home. Certainly not that relative of mine.

    ● Assistant news editor Thean Lee Cheng thinks it’s time to nip speculation in the bud.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/9/25/business/7099658&sec=business

  13. Banks, insurers compete for piece of mortgage pie
    By ELAINE ANG

    COMB through any newspaper these days and chances are you will most certainly stumble upon advertisements on property loans touting attractive terms and conditions.

    It’s a highly competitive landscape out there.

    Apart from competing among themselves for a piece of the mortgage pie, banks also have to contend with insurance companies which offer pretty appealing terms as well.

    OCBC Bank (M) Bhd head of secured lending Thoo Mee Ling sees competition as a way of life in the property loans business.

    “Intense competition, especially in pricing, has almost become the nature of the mortgage business.

    “However, OCBC’s strategy has always been to keep close tabs on customers’ needs and not only meet but exceed their expectations as well as by going the extra mile,” Thoo says.

    Currently, the discount on base lending rates for housing loans range from 1.8% to 2.2% in the market. Thoo says property loans will continue to have a significant influence on the bank’s net profit.

    Despite the intense competition, HSBC Bank Malaysia Bhd general manager (personal financial services) Lim Eng Seong says the bank is comfortable with the size of its property loans book.

    Lim believes HSBC’s strong product and service proposition via a flexible mortgage will be a key differentiating factor to grow the business further.

    “Our flexible loan allows customers to make extra payments to reduce interest payments and shorten the loan tenure. Should an urgent need arise, customers may redraw the excess payments made,” he says.

    HSBC offers home loans for a minimum of five years to a maximum of 35 years where margin of financing can go up to 95% of the property’s market value.

    To ING Insurance Bhd chief operating officer Isold Heemstra, residential property mortgage is a way to diversify investment income for insurance companies.

    “It helps to mitigate market volatility and provides a stable income stream to insurance companies that demand long-term cashflows,” he says.

    However, ING’s mortgage portfolio shrank last year as borrowers went for floating rate products due to the lower overnight policy rate. Insurance companies offer fixed-rate residential mortgages.

    Heemstra admits that competition in the property loans business has always been intense.

    “We differentiate ourselves by providing a mortgage business total solution that comes with fixed-rate home loan with house owner and life insurance protection.

    “ING also provides protection to the valuables and contents in one’s household against loss or damage on selective perils,” he says.

    ING provides financing for residential properties only with a maximum loan amount of 90% and up to 30 years loan tenure.

    ING now offers a fixed interest rate of 4.85% per annum (customer pays all closing fees) and 5.25% per annum (ING pays all closing fees).

    American International Assurance Bhd (AIA) chief executive officer Khor Hock Seng says the company has experienced positive loans growth since 2005 although last year was challenging.

    Its property loans portfolio are mostly made up of fixed-rate residential mortgages with margin of financing of below 80%.

    Khor says the company will continue to work with its agency force and business channels to grow the property loans business. “We will also offer various packages to meet the needs of our clients,” he says.

    AIA’s residential mortgages has a fixed rate of 4.99% per annum (non-zero moving cost) and 5.25% per annum for zero moving cost. The margin of financing is up to 90% for a maximum tenure of 30 years.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/10/2/business/7145479&sec=business

  14. Call to curb loans for third home buyers
    By DAVID TAN

    GEORGE TOWN: The Penang Master Builders’ and Building Materials Dealers’ Association (PMBBMDA) urges the Government to impose a cap on the margin of advance for housing loans for third home buyers.

    The move was necessary to curb speculation, reduce gearing of purchasers, and maintain the sustainability of housing prices and the property market, PMBBMDA president Vincent Ong told StarBiz.

    “The first and second home buyers should continue to get borrowing up to 90% of the property value to ensure that the demand for properties is sustained, creating spill-over effects for the contractors and building materials suppliers,” he said.

    He also added that the federal and state governments should also implement more government projects in Penang, as there were so far only 28 projects, with a total value of RM172mil, awarded by the government sector for Penang for the period January to June 2010.

    “Even though the number of government projects has increased from 10 in the first quarter to 18 in the second quarter, the value of government contracts is still very low and only makes up about 13% of the total value of projects awarded to the Penang state of RM1.35bil,” Ong said.

    Meanwhile, PMBBMDA immediate past president Finn Choong said the Government should quickly draw up a national policy on green building.

    Choong said so far the guidelines for green or environmentally friendly buildings and policy were being implemented on a piecemeal basis at the state level.

    “A standard national policy on sustainable buildings would not only further spur the adoption of green lighting components such as light-emitting diodes (LEDs), and environmentally friendly materials but also commit the country towards a sustainable culture as we make the transition towards a developed nation,” Choong added.

    On another matter, the PMBBMDA urged the federal government to consider deferring or revoking altogether the imposition of ad-valorem stamp duty for all service agreements in 2011.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/10/14/business/7221914&sec=business

  15. Full loan for first-time house buyers

    FIRST-TIME house buyers with a family income of less than RM3,000 per month need not pay the 10% down payment under the My First House Scheme (Skim Rumah Pertamaku).

    The 10% down payment will be guaranteed by Cagamas Bhd for houses priced below RM220,000.

    This will allow the first-time buyers to obtain 100% loan.

    They will also be given stamp duty exemption of 50% on instruments of transfer on a house not exceeding RM350,000.

    The Government also proposed a stamp duty exemption of 50% for loan agreement instruments to finance first-time purchasers.

    There will also be a housing assistance programme with an allocation of RM300mil for the construction and repair of some 12,000 houses nationwide – particularly in Sabah and Sarawak.

    For estate workers, the Government will help them own houses under a RM50mil housing sponsorship scheme.

    The scheme is open to all Malaysian estate workers to assist them in obtaining housing loans with a maximum of RM60,000 for the purchase of low-cost houses at 4% interest, and a repayment period of up to 40 years, which can be extended to the second generation.

    For government servants, the goodies include an increase in the maximum loan eligibility from RM360,000 to RM450,000 effective Jan 1.

    Fomca secretary-general Muhammad Sha’ani Abdullah said these moves would help first-time purchasers get housing loans, but failed to tackle the core issue of house prices which had skyrocketed.

    “A first-time buyer may get the loan to buy a house, but it may not be the type of house he wants because prices are just too high,” he said.

    He added that the Government should set specifications and standards for houses under the RM220,000 price range.

    “A house can be priced at RM220,000, but the specifications and the quality of the house may not be much better than a low-cost house,” he said.

    Malaysian Small Holders Plantation Co-operative secretary Datuk Aliasak Ambia said the move to help estate workers to own houses was a good move.

    “The co-operative provides houses for estate workers to live in while they are still working, but once they leave their jobs, they will not have any homes of their own,” he said.

    fr:thestar.com.my/news/story.asp?file=/2010/10/16/nation/7241715&sec=nation

  16. First home scheme to attract young buyers

    PETALING JAYA: To promote home ownership among Malaysians, the Government has proposed to introduce First Home Scheme whereby Cagamas Bhd will provide a guarantee on the 10% down-payment for houses priced below RM220,000.

    The scheme is for first-time house buyers with monthly household income of less than RM3,000. It is aimed at young adults who have just joined the workforce.

    With the guarantee from the national mortgage corporation, it means that eligible house buyers will be able to obtain a 100% loan.

    First-time house buyers will also be given stamp duty exemption of 50% on instruments of transfer on a house priced at not more than RM350,000. The Government has also proposed stamp duty exemption of 50% be given on loan agreement instruments to finance such first-time purchase of houses.

    To expedite the process of property registration, the Stamp Act 1949 had been amended to enable the Valuation and Property Services Department assess properties after the payment of stamp duty to the Inland Revenue Board. This will reduce the property registration process from 30 days to one day.

    Welcoming the First Home Scheme initiative, Real Estate and Housing Developers Association (Rehda) deputy president Datuk FD Iskandar Mohamed Mansor said the scheme was good news for the housing sector, “as just over 73% of houses transacted falls under the category of below RM220,000.”

    The 50% stamp duty exemption for houses below RM350,000 covers an estimated additional 10% of the market, and together the incentives benefit all-in-all roughly 87% of housing transactions throughout the country.

    While Rehda views the measure as a very positive step towards closing the income gap, it acknowledges that properties which are found within these price brackets are not easily found in Greater KL or Penang due to higher land and construction costs in these vicinities.

    Concurring with Rehda, C H Williams Talhar & Wong Sdn Bhd managing director Foo Gee Jen expects the First Home Scheme to have a lesser impact on the Kuala Lumpur market as the prices of most houses here exceeded the ceiling set by the budget.

    “There will be more significant impact on housing demand in other cities such as Johor Baru, Malacca, Ipoh, and Kuantan,” he noted.

    Reapfield Properties Sdn Bhd managing director David Ong said the Government’s “invisible hand” in steering the housing market was important in the light of the current market conditions.

    “The Government is wielding its influence on two fronts – to help first time buyers and to signal to developers that a certain type of housing within a certain price range is needed. Developers can probably consider townhouses or condominiums within a certain price range,” Ong said.

    Ong said hopefully, with this move, developers would build houses within this pricing category.

    Khong & Jaafar managing director Elvin Fernandez said the Government’s move not only recognised first-time house buyers, “but also acknowledged them as newcomers into the workforce.”

    “The perimeters set out in the budget are correct. This is the type of house this group will be able to afford. They will need this kind of assistance,” he said.

    The move, he said, did not mean that the Government was not considering raising the downpayment for house purchase to 20% or 30%.

    “That may still come later on as increasing the percentage of downpayment does not fall within the budget,” Fernandez said.

    Ireka Development Management Sdn Bhd chief operating officer Lim Ech Chan said the First Home Scheme would enable first-time buyers to afford their first home and promote a healthy property market overall, encouraging more affordable housing to be made available.

    Amphil Corp Sdn Bhd chief executive officer PK Poh said it was an excellent measure to provide the means for young households to purchase “starter” homes “as it will be a sort of forced savings and a hedge against inflation, besides saving money on rental.”

    “In our major cities, this would often mean buying small one- or two-room apartments in areas a little further from their workplace than they might like. However, the securing of such a loan is still subject to the banker’s determination of the repayment ability of the borrowers.”

    On the development of the 1,072ha Malaysian Rubber Board land in Sungai Buloh by the Employees Provident Fund, Poh said most developers were looking forward to the finalisation of the master plan and the granting of conversion and planning approval from the state.

    “The land area comprises both freehold and leasehold lands and needless to say, developers would want to see how they could position themselves and participate in the roll-out of this massive development,” he added.

    The mixed development comprising affordable houses as well as commercial, industrial and infrastructure facilities, is estimated at RM10bil and is expected to be completed by 2025.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/10/16/business/7240045&sec=business

  17. Tips for first-time house buyers
    By EDY SARIF

    BUYING a house for the first time is like getting married. You need to be level headed, think wisely, plan well and eliminate the chances of regretting the decision later.

    For first-time house buyers, scouring the market for a suitable property can be exhilarating but it can also be frustrating if you don’t find “the one” or you do but it comes with a bust-your-budget price tag.

    There are a few factors to consider in the pursuit of buying your first dream house. Firstly, a prospective house buyer should ascertain how much upfront money he or she can fork out, says SK Brothers Realty Sdn Bhd general manager Chan Ai Cheng.

    “This is important. There are heavy upfront costs depending on what you buy, including transfer cost, legal fees and so forth,” she says.

    Secondly, the prospective buyer needs to check with the bank on the amount of loan that can be secured based on the income level. “At the same time, try to have savings amounting to at least three to six months of loan instalments plus household expenses as reserve fund, in case of an emergency,” Chan says.

    In short, if you want to buy a house, you need to figure out your affordability – how much you can afford.

    A real estate agent tells StarBizWeek that the rule of thumb is that monthly loan repayments should not exceed one third of the gross monthly income.

    “In assessing your repayment capability, the financial institution would also take into account your other debt repayments such as car loan, personal loan and credit cards,” he says.

    He adds that the margin of financing can go as high as 95%.

    “The higher the margin, the higher you will have to pay per instalment. Plus, at a given rate, a shorter tenure will require you to pay higher instalment,” he says.

    He adds that after you have set your finances right, make a list of features you are looking for in a house.

    “Be sure that the house you are buying is big enough to meet all your future needs, in case you have additional members in the family,” he says.

    “Take good note of the area and the neighbourhood as these aspects will play a crucial role in determining the price of the house in case you want to sell it in future,” he adds.

    In terms of financing, buyers have a wide array to choose from be it conventional or Islamic.

    Under the conventional financing, one’s outstanding loan consists of principal plus the interest charged.

    “The interest is actually the financial institution’s cost in obtaining the funds. Islamic financing works on the concept of buying and selling where the financial institution purchases the property and subsequently sells it to you above the purchase price,” says a banker.

    As for the loan tenure, it can range from anything up to 30 years or until the borrower reaches the age of 65, whichever is earlier.

    She also advises that it’s better to buy than to rent a home as the latter is largely expense without equity.

    Furthermore, she says: “When you invest in a home, it offers the possibility for appreciation in value. At the same time, the equity becomes yours when you’re still paying off your mortgage. You even get to live in it while your investment matures.”

    Still, the key determinant ought to always be keeping within the budget.

    “That’s most important. It’s easy to be swayed into wanting a bigger home or a bungalow just because your friends or someone else has one. This is nice to wish for but definitely not practical if it’s way out of your budget. Be realistic,” the banker says.

    Ask on the “right” timing to buy a house, she says there is no “right” time to buy or sell anymore.

    “If you find a home now, don’t try to second-guess the interest rates or the housing market by waiting. Changes do not usually occur fast enough to make that much difference in price and a good home will not stay on the market long,” she says.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/10/16/business/7231483&sec=business

  18. Take up long-term housing loans, buyers told

    PETALING JAYA: Home buyers are encouraged to take up two-generation loans and financial institutions should support the move.

    “The most important thing is for the individual to own a house for his family to live in.

    “If loan repayment is extended to the second generation, that means the family will remain intact,” Housing and Local Government Minister Datuk Chor Chee Heung told a press conference here yesterday.

    He had earlier launched the MBSB Ultimate mortgage programme by Malaysia Building Society Bhd, which offers loans for customers up to the age of 70 years.

    Chor said Budget 2011 encouraged the two-generation loan term, refuting suggestions that stretching the loans that far would be a burden to the younger family members.

    “I don’t think it is a burden for the next generation because the repayment is spread over a long time,” he said, adding that the younger generation is financially strong and can even afford to buy another house.

    MBSB chief executive officer Datuk Ahmad Zaini Ithman said the idea of offering longer-term housing loans was to preserve the value of assets or investments.

    “Ownership in the past meant buying for investment. But now, a house is a place for the family to stay.

    “I think more financial institutions should pursue this ap­­proach,” he said.
    fr:thestar.com.my/news/story.asp?file=/2010/10/23/nation/7286176&sec=nation

  19. Ministry wants ‘no down-payment rule’ to cover RM350,000 homes

    KUALA LUMPUR: The Housing and Local Government Ministry will propose that the ceiling price of homes that do not require a down-payment for purchase be raised to RM350,000.

    Minister Datuk Chor Chee Heung is expected to table the proposal at next week’s Cabinet meeting.

    Chor said that raising the ceiling price would benefit more people.

    “The request is not unreasonable because for someone to own a house below RM220,000, one would have to travel a bit further even with the highway,” he told reporters yesterday after opening the property fair Mapex 2010.

    In his Budget 2011 announcement, Prime Minister Datuk Seri Najib Tun Razak proposed that first-time house buyers with a household income of less than RM3,000 be allowed to obtain a 100% loan if they buy a house for RM220,000 or less.

    Yesterday, Real Estate and Housing Developers Association (Rehda) deputy president Datuk Fateh Iskandar urged the Government to consider increasing the ceiling to a more realistic figure like around RM350,000.

    “Houses priced at RM220,000 are really hard to come by these days and if this price ceiling is not increased, this particular incentive and inducement will not benefit the rakyat, especially those living within the Klang Valley and Penang,” said Fateh.

    He also suggested that instead of looking at the buyers’ household income, their disposable income should be considered.

    On another matter, Chor said his ministry was working with the Natural Resources and Environment Ministry on amendments to the Building and Common Property Act.

    “We aim to table the amendments in Parliament by March next year with the goal of detailing the boundaries, roles and responsibilities of strata title owners, property managers and developers so that the rights of home owners can be better protected,” he said.

    He said the amendments were needed because they would spell out how house owners could exercise their rights under the Act and how many votes a house owner would have if he or she owned more than one unit in the entire building.

    fr:thestar.com.my/news/story.asp?file=/2010/10/24/nation/7289378&sec=nation

  20. Rising concerns over household debt and bankruptcies among young M’sians

    Household debt to GDP rose to 76% last year from 64% in 2008

    By YAP LENG KUEN

    PETALING JAYA: Rising concerns over household debt and bankruptcies among the young have prompted several suggestions on how to tackle the problem at source.

    Apart from the expected curbs on property loans and possible limits on credit card usage, other steps include the creation of a personal credit scoring system, enhanced education and awareness among consumers as well as the financiers themselves.

    RAM Ratings head of financial institution ratings Promod Dass said: “Based on the latest available Bank Negara statistics, household debt to gross domestic product (GDP) has marched upward from about 64% in 2008 to around 76% last year.

    (Last year, this amounted to about RM389 bil).

    “This level is similar to that in Singapore and far lower than in Japan, the United States and Britain which are well above the 100% threshold.

    “It is likely that household debt to GDP would keep escalating beyond a manageable level, if measures are not put in place, given that interest rates are still relatively low in Malaysia and credit for qualified borrowers is easily obtained,’’ said Promod.

    According to CIMB Investment Bank Bhd chief economist Lee Heng Guie, property loans make up about 50% of household loans, auto (27%), personal uses (8.9%) and credit cards (6.3%).

    The financial assets cover – comprising savings, investments and insurance – remain strong at 2.3 times; nevertheless, rising household debt may constrain consumption especially with any rise in interest rates and debt service costs.

    “There should be more awareness on educating households on how to manage their debt,’’ said Lee.

    “While authorities and the financial sector could educate potential borrowers through detailed booklets or information on websites, a more effective approach would be to require borrowers to have credit scores before they obtain loans as in some developed markets.

    “In this way, borrowers will be aware about changes in their credit profile as they gear up and the impact it will likely have on their borrowing rates,” said Promod.

    The Credit Counselling and Debt Management Agency (AKPK) has pointed out that during the past year, almost 50% of the 3,000 individuals who approached the agency for credit counselling each month were aged between 30-40 years.

    Another 15% were in their 20s.

    According to the agency, problems over car loans and credit card advances were the top two reasons young Malaysians sought credit counselling.

    To Malaysian Rating Corp Bhd (MARC) vice-president and head of financial institution ratings Anandakumar Jegarasasingam, the rising level of household sector loans is “a definite concern.’’

    “In fact, the household sector is the single largest sector exposure for Malaysian banks, accounting for 55% of banking sector loans at end-2009 – a very significant increase from the low 16% of banking-sector loans at end-1998,’’ he said.

    Anandakumar believes that the repayment ability of the household sector is overestimated for the following reasons:

    # Considering that the bulk of household sector borrowings is for mortgages and auto financing, the distribution of household sector debt is likely to be more even among the population than the distribution of financial assets.

    # The vulnerability of the household sector’s financial asset holdings to adverse wealth and income shocks as a result of the increased proportion of market price-dependent financial assets.

    # Anecdotal evidence suggests that bankers are focusing more on the underlying collateral, especially for mortgages and auto loans.

    During a system-wide crisis, when defaults escalate and asset prices are depressed, the recoverable value of such collateral can diminish rather rapidly.

    According to Anandakumar, the proposed reduction of the loan-tovalue (LTV) ratio for the purchase of the third property may not be sufficient to control the level of household sector debt.

    Possible policy measures to curb the rising household sector debt include the imposition of more stringent LTV ratios for multiple home purchases within a particular time band and for properties of certain value; fixing a higher minimum income requirement to be eligible to apply for credit cards and personal loans; limiting the maximum credit limit on credit cards to the equivalent of two months’ salary as well as the number of credit cards that an individual can hold to two or three cards.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/10/25/business/20101025073534&sec=business

  21. Buyers to pay more after second house

    KUALA LUMPUR: Malaysians have to fork out more money from today to buy more than two houses after Bank Negara slammed the brakes on property speculation.

    The central bank announced with immediate effect the implementation of a maximum loan-to-value (LTV) ratio of 70% for people buying their third or more house, meaning those wanting their third property onwards have to come out with their own cash amounting to 30% of the value of the house.

    “Financing facilities for purchase of the first and second homes are not affected and borrowers will continue to be able to obtain financing for these purchases at the present prevailing LTV level applied by individual banks based on their internal credit policies,” Bank Negara said in a statement yesterday.

    The central bank said at the national level, property prices had increased steadily and remained manageable compared with the historical trends but for certain hot locations, particularly around the urban areas, faster growth in prices and transactions had been seen.

    “This is further supported by an increase in financing provided for multiple unit purchases by a single borrower, suggesting increasing investment activity that is of a speculative nature,” it said.

    fr:thestar.com.my/news/story.asp?file=/2010/11/4/nation/7360744&sec=nation

  22. Support for Bank Negara’s housing LVR cap move
    By ANGIE NG and DALJIT DHESI

    PETALING JAYA: Bank Negara’s imposition of a maximum loan-to-value ratio (LVR) of 70% for a third and subsequent housing financing facility taken by a borrower is seen as a timely pre-emptive measure to avert unhealthy speculative activities and a potential property bubble, industry players concurred.

    With the latest measure that takes immediate effect, people buying their third and subsequent house would be required to pay a higher down-payment than the current standard minimum of 10% of the value of a house.

    In a statement yesterday, the central bank said financing facilities for purchase of first and second homes would not be affected and borrowers would continue to be able to obtain financing for these purchases at the present prevailing LVR level applied by individual banks based on their internal credit policies.

    Real Estate and Housing Developers Association president Datuk Michael Yam said the association supported the measure as it would ensure a healthier and orderly housing market.

    “There are some hot spots in the housing market where prices have appreciated higher than the average price increases in other locations. As financing for the first and second housing properties will not be affected by the ruling, the move is not expected to dampen the performance and growth of the housing property sector.

    “Meanwhile. the LVR cap on those buying their third and subsequent house should stem speculative buying and ensure a more sustainable housing market,” Yam added.

    Mah Sing Group Bhd group managing director cum group chief executive Tan Sri Leong Hoy Kum said the move was not surprising as Bank Negara had given earlier indications of such a move.

    “The move should not significantly affect the overall sentiments of the market which comprises mainly first-time buyers and upgraders.”

    Leong said there was no property bubble as price increases were only for properties with good concepts in good locations.

    “As long as developers offer quality properties with good concepts in prime locations, there should still be takers due to our strong employment market, low interest environment and good liquidity in our financial system,” he added.

    National House Buyers Association honorary secretary-general Chang Kim Loong said the measure would help curb speculative buying in the local housing market.

    “Prices of landed residential properties have increased substantially over the last five years.

    “We are glad that the Government has heeded HBA’s call with regards to the LVR. We will next seek to make housing more affordable for middle-income households and have pricing control for this group of buyers.

    “HBA has urged the Government to set up a Special Task Force with such an objective and aspiration,” he said.

    RAM Ratings head of financial institution ratings Promod Dass said: “Given this LTV measure only applies to the third home loan onwards, there should still be ample opportunities for banks to focus on first-time home buyers and perhaps to finance the purchase of a second home for lifestyle upgrading purposes.”

    “All said, the level of prevailing interest rates would be an important factor too for the health of home loans, given that the bulk of outstanding home loans are based on floating interest rates,” he said in an e-mail interview.

    The Association of Banks in Malaysia (ABM) chairman Datuk Seri Abdul Wahid Omar said while the banking sector supported house ownership, ABM agreed that appropriate measures should be adopted to avert unhealthy speculative activities which could lead to a property bubble.

    Abdul Wahid, who is also Malayan Banking Bhd president and CEO, said: “In my view, the application of the measure is clear and specific and the LTV ratio itself, optimal.

    Given that financing for first and second housing properties will not be affected by the ruling, the move is not expected to dampen or have an adverse impact on the growth of residential property development sector as well as the banks’ house financing business.

    “Affordability of homes for genuine buyers will be preserved as banks continue to lend prudently under their respective risk management framework.”

    On the Financial Capability Programme, he said it underscored the view shared by ABM that education was paramount in the promotion of sound financial and debt management.

    Details of the implementation of the programme would be announced next month.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/11/4/business/7360724&sec=business

  23. Programme to help you manage your money and debt
    By TEE LIN SAY

    Financial capability programme to address credit card debt

    PETALING JAYA: The introduction of the financial capability programme will help equip individuals with practical understanding and skills in money and debt management.

    AmResearch Sdn Bhd senior economist Manokaran Mottain said this was a good move as the number of youngsters becoming bankrupt over credit card debt was increasing.

    “This is not a serious problem yet but there are more people getting into this situation. We need to educate them,” he said.

    To be introduced by Bank Negara, the programme will be offered by Credit Counselling and Debt Management Agency and will commence from January. Details of the programme will be announced next month.

    “Bank Negara must have detected a certain trend in spending among a certain category of people and decided to implement this programme,” said a banking analyst.

    He added that there were young people owning up to five cards each and going on buying sprees without the means to repay their debts.

    “The move shows that Bank Negara is keeping to its stance of being prudent, proactive and pre-emptive. It wants to avoid systemic problems in the future,” he said.

    According to Bank Negara’s 2009 annual report, the percentage of household debt to gross domestic product shot up to 76.6% in 2009, compared with 63.9% in 2008. The increase in household debt resulted in total debt-to-personal disposable income rising to 136% in December 2009, from 114.9% in January.

    According to the Bank Negara website, household loans in September were up at 13.3% compared with 9% in the previous corresponding period.

    The total non-performing loans of credit cards hit RM558mil in September, slightly less than RM559.4mil recorded in January.

    While the number of credit cards in circulation may have dropped, the amount outstanding is still almost the same, indicating that while fewer people may be using their credit cards, the consumption value is higher.

    In September, there were 8.7 million credit cards in circulation compared with 11.1 million one year ago. The outstanding balance for September was RM26.36bil against RM23.26bil a year ago.

    Meanwhile, property analysts were neutral on the implementation of a maximum loan-to-value (LTV) ratio of 70% for the purchase of a third house.

    ECM Libra research head Bernard Ching said the LTV cap was expected to have negligible impact as it only applied to buyers with third or more mortgages while cash buyers were not affected.

    “We believe there will be no significant impact on sentiment and property stock prices as this measure has been widely expected and somewhat diluted from initial expectations,” he said, adding that sales momentum was likely to remain strong in the near term.

    Pointing out that it had been almost two years since the introduction of easy financing schemes by developers, Ching said he expeced an increasing supply of new properties next year and 2012.

    CIMB Research Head Terence Wong said the LTV cap would curb excessive speculation.

    While he did not see a bubble developing in residential property in general, there were pockets where prices had gone up significantly which, in turn, attracted some speculative activity. This was particularly true for landed terrace houses and semi-detached homes in Kuala Lumpur.

    “We believe there are fundamental reasons for the strong price gains as land in popular areas is becoming scarce and buyers have to pay a premium for the convenience and prestige of such locations,” he said.

    fr:biz.thestar.com.my/news/story.asp?file=/2010/11/9/business/7365961&sec=business

  24. Developers unfazed by new ruling
    By DANNY YAP

    KUALA LUMPUR: Most developers participating at the Star Property Fair 2010 are unfazed with the lower loan-to-value ratio imposed by Bank Negara early this month on buyers taking up a third loan on a new house as they believe the new ruling would not significantly impact their bottomline.

    The decision to impose the new ruling is to cool down the property market and to curb speculations.

    Effective from Nov 3, house buyers who have signed up for two mortgages and intend to apply for a third loan will only be eligible to get up to 70% financing of the value of the house.

    The Haven Sdn Bhd personal assistant of principal Yeo Kong Meng said: As a medium to high-end developer, we have not found this new ruling to have impacted our sales so far.

    We also don’t think this cap on home financing will have a severe impact on our bottomline going forward.

    He said many home buyers were already placing at least 20% deposit to book the company’s properties, prior to the new ruling.

    Yeoh also said 60% to 70% of the company’s customers were housebuyers, while 30% bought property for investment. Many of our house buyers have high disposable incomes; paying a higher deposit for their new property is not an issue.

    Event manager K.Kalai said the company’s main property project The Haven in Ipoh would comprise of three-condo towers built next to a natural lake and had a total gross development value (GDV) of RM230mil.

    Tower A is almost fully taken up and is priced at RM338 per sq ft. The price range of a unit starts from RM331,500 onwards, he said, adding that all three towers would be fully built by 2013.

    Penang-based Ivory Properties Group Bhd project director Murly Manokaran said property sales had not been impacted at all by the new ruling.

    We actually welcome the new ruling, he said, adding that it would ensure that banks had housebuyers who were less likely to default on their loan payments.

    Sime Darby Property executive (property division) Rizal Affendy Abdul Latif concurred with the other developers that the new ruling had not impacted sales.

    We have so far not experience a slow down in sales due to a higher deposit on a third house. Most housebuyers with an investment intention are prepared for a higher deposit, Rizal Affendy said, adding that Sime Darby’s strong reputation on delivering quality homes might have helped ensure sales remained strong.

    We are targeting sales of about RM50mil for this fair but it will include following up with enquiries after the fair, he said, adding that the bulk of the house buyers were likely to be first or second-time home buyers.

    Plenitude Heights Sdn Bhd executive (sales and marketing) Kevin Ho also concurred that the new ruling should not significantly impact the company’s sales.

    The uptake of Plenitude Heights properties so far has been satisfactory despite the new ruling, he said.

    Rimbunan Raya Sdn Bhd senior manager Moses Ooi Chong Seng said the company was a niche and high-end developer.

    Our current project The Enclave, in Perak, is a gated exclusive boutique residential development comprising of 45 bungalows, of which there are only eight units left for sale with price tags ranging from RM1.5mil to RM3mil, Moses said, adding that sales were good despite the new ruling

    fr:biz.thestar.com.my/news/story.asp?file=/2010/11/20/business/7467954&sec=business