No to 80% mortgage cap on housing

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. - By Ong Han Sean (The Star)


September 6, 2010 at 5:50 PMChong

I would say Yes to 80% loan max for property prices above RM500,000 as these price range are for those rich and speculators.
Let's say Yes to 80%, but exluded houses price below RM500k!

September 6, 2010 at 6:17 PMDaamao

with the way property price is skyrocketing, it will be even more impossible for young professional, earning RM2.5k starting pay, to buy houses (should i say, apartment, to be more realistic?)

so exclude the rule for 1st time property buyer, but YES to 80% for second house onwards. I would suggest apply max 70% loan for 3rd property lagi bagus!

Property bubble is a result of irresponsible speculator, if they can afford 20% down, great! But the move should cool down the property market, because people will stop chasing for something they cannot afford.

This is also good for preventing young professional taking part in property speculation and getting caught when the property bubble burst.

September 6, 2010 at 6:40 PMoswald

Setting the line at 500k doesn't help much for the young people. Condo below 500k such as The Spring will still be targeted by speculators, they earn 100k easily.

But this price range (200-300k) are the price affordable by the young adults. Not many of them can afford property >500k.

Furthermore, it will be a great burden for them to fork out 20% of downpayment + legal fee and other misc fee.

first time buyer should still be able to enjoy 10-90 loan packages, the 80% cap should only apply to those have already their first house.

September 6, 2010 at 10:09 PMUnknown

10/90 for first house
20/80 for 2nd house
30/80 for 3rd house
40/60 for 4th house

who will need so many houses by the way? only those greedy speculator.

anyway the above loan only can help to deter the small ikan bilis speculators like those makan gaji. Those big fish speculator are cash rich, this rulling will not impact them to continue to 'char'

September 6, 2010 at 10:54 PMDaamao

“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?”

Great point. but if this is true, 40% of workforce already can't afford 90% of the houses in urban area.

The fact is, salary is far far lagging the property price. If this is not regulated, 40% of workforce can only afford to buy low cost houses, while 40% of property will stay vacant waiting for next speculator... and the next.

Not healthy.

September 7, 2010 at 12:32 AMUnknown

Why should the loan cap be applied only to property above 500K ?

The purpose of the 80% loan limit is to curb excessive speculation hiking up the prices.

Majority of the people buy those property below 500K where intense speculation is just as rampant ..... escalation of prices due to unscrupulous speculators causes the most hardship to these people

Loan cap should be imposed across the board .....for a healthier and more resilient property market in the long term .

September 7, 2010 at 5:46 AMPenang Fan

I disagree with the opposition. Why even with the present 10% down payment. It is still beyond the reach of many young professionals. This was the result of greedy speculators who pushes up the property prices for the last 5 years. The property market was their gambling table. By increasing the down payment to 20% or even 30% will cut out a lot of small speculators which amounted to 60% to 70% of the speculators pool. Once we got rip of these little piranhas prices will fall to a more realistic level. I also agree that perhaps 1st time home buyers should be allowed a 10% down and 30% to 50% for 2nd, 3rd and there after property ownership. This will greatly reduce speculations except for cash rich buyers who will be difficult to rip off. Even 50% down will not drive them off. They are usually rich overseas speculators so perhaps disallowing them to own more then 1 property will do the trick. We need to do something to prevent a bubble and also for the interest affortability to 1st time home buyers. Just my 2 cents.

September 13, 2010 at 5:53 PMLim

I agree with Lawrance statement. Eventually most of the young professions are having difficulties of getting one house. The range of salaries and property price way too huge. Not all couples / family afford to buy a house even income has combined. Investors should forkout more cash to down pay for having property investment. RM500k ruling, doesnt impact much, as not all the investors are investing property above RM500k. House property is more for family purposes. If wanted to enjoy luxury of "money earn money" basis, extra money for downpayment should applied.