Reduce loan to 80% for homes over RM500,000

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. - The Star


September 7, 2010 at 6:26 PMUnknown

That’s right, this is more make sense compare to the proposal of like 2nd house onward 80% loan;

Because this cover below case:

A family have 2 kid, and graduated and now working in KL, but they thinking to move their 65+ years old mum & dad from a very remote village.
With the starting fresh graduate salary, they both have to join finance and buy a 2nd hand condo;
Now, they are happy stay together; they can have job, have fun, still can take care the parent…
2 years later… they will need to start own family, sure this 2nd hand condo will not able to stay more and more ppl; So, they have to get different place.

Mean, they still afford to buy just 10% down payment as long as not more than 500K.

This is also avoid doubt that 1st house/condo is join finance, 2nd then need to pay 80%?, thing that…

September 7, 2010 at 7:07 PMTim

Is the property market bubbling over?

An interesting article in The Malaysian Insider today. Not sure about Penang...

September 7, 2010 at 9:05 PMPenang Fan

This action will only make properties below $500K to be more speculative. Why even with the present 10% down payment, most of these new development are over priced and beyond the reach of many young professionals. This was because of greedy speculators who pushes up these property prices(especially properties below $500K as it is more affordable to speculators) for the last 5 years. The property market was their gambling table. By increasing the down payment to 20% or even 30% across the board it will cut out a lot of small speculators which amounted to 60% to 70% of the speculators pool. Once we get ripped of these little piranhas prices will fall to a more realistic level since you reduces the artificial/inflated demand due to speculations. I also agree that perhaps 1st time home buyers should be allowed a 10% down but increase to 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 affordability to 1st time home buyers. Just my 2 cents.

September 8, 2010 at 10:02 AMUnknown

I strongly agree with Penang Fan.

September 8, 2010 at 11:10 AMUnknown

Over 90& of the property transactions made are on those property below RM500K where speculators are most prevalent resulting in the prices are spiralling upwards

if loan limits and other measures are not imposed on these property below RM500K, imagine how the situation will worsen with more greedy speculators targeting these price range, relentlessly pushing up the prices .... the poor ordinary people who need a roof over their head most are the biggest losers here

September 8, 2010 at 2:32 PMFREETHINKER

I quite agree with Penang fan view....also the fact >90% transactions are below RM500K. In Penang context this could mean a cruel act to diminish hope of the younger generation (high income and little savings type) who desperately wanted to buy landed property get sleepless nite for past few least until our government make a clear guidelines.

I think first of the government need to study the ROOT CAUSES of the spiraling prices.
Most of us would agree that it is mostly due to developer (NEW projects), bulks of investors and lenders (banks).

By imposing RM500K, will it address the issue in longer or would make it worse for middle income people? I can imagine end up our skyline will be dotted with countless high rise aprt/condo that price <500K. will be lots of slum.

My advice we cannot simply copy and paste Singapore/HK way to control the property market as Spore HDB flat are really of world class standards public housing. Some of the buildup are more than 1000sqft and suitable for bigger family.

Govt may thought they could punish bulk buyer and developers but in fact it would make them happier as mentioned by Penang Fan. Fyi, you can look at the major share holders for those big developers like SP Setia, IJM, Sime, MRCB etc and who are behind them and their connections. I just don’t want to elaborate to make it another political issues.

I would propose a Investor Social Responsibility (ISC) Tax Fund instead of LVR....regardless of property value.

For those who already owned 2 houses (at the point ownership), The 3rd house onwards the sales should be additionally tax incrementally. (Should allow 2 houses as some people depend on rental to survive their old days and also some poorer people students, foreigners need to rent) Eg. For 3rd house the sale will be subject to 10% tax on nett profit to be given to the vernacular school of the that area. Eg. If seller is Muslim, the tax should go to Sekolah Agama, Indian to Tamil School, Chinese to Chinese School funds etc of that area (by parliamentary area) or worst case state govt. Others let them choose their preference. If within a year period there is another sale, the tax should increase that to 20% tax.
The reason it should go to that state or in fact that area as it means people are buying into that area to stay and it will eventually need more fund for the schools for the population in that area.

For NEW projects, investors (buy more than one) should be tax 2.5% on each additional unit they buy upfront. Developers too to be taxed 2.5% each for bulk buyer case. Normally for subsales market the buyer is more genuine instead of speculative and hence should not be penalized unless they own more than 2 already and plan to sell it. This can reduce flipping and also increase the social responsibility of investors and unscrupulous developers. This will also prevent govt from benefiting from the additional taxes (already RPGT in place).

This may sound like a socialist measures but at least we can reduce the “free market” from big fish as people always feel that Developers and investors made use of ordinary people like. Reducing the LVR to 80% will actually make more people to suffer and the rich get richer. 10% additional downpayment hardly make any pain as after all they still can recoup their investment. The extra 10% is still their money from FD transfer out.

For banks....may be can impose windfall tax to be contributed to the fund above.

For average people like me who plan a retirement with to get another second property for future rental it will be quite tough.

To be fair whatever need to be done should not affect people/investor that already bought their investments.

Well this is just a rough ideas and proposal...the point I am trying to say here we need to make those profiteering to pay the price back to rakyat and not back to their own pocket. Please take note, It should be REGARDLESS of the amount of value.

September 9, 2010 at 9:08 AMVoice

I agree that property price is going crazy, and I totally disagree with the "bulk purchasers" idea.

Foreign investment could be another culprit, but this is part of the globalization that we have to accept. Otherwise we will be like North Korea (everything is enclosed).

With regards to reducing the margin, let's put some figures here as an example to articulate.

At the current 90%:
a) Owner is asking for 600k;
b) Purchaser has to come out with 10%, ie. 60k upfront with 540k loan.

If it is reduced to 80%:
c) Assuming that owner is still asking for 600k, then purchaser has to come out with 20%, ie. 120k upfront with 480k loan. Making it much more difficult to bite;
d) Assuming that the owner reduce by 10% (ie selling at 540k, which is a lot more like Bumi discount and unlikely), then purchaser has to come out with 108k upfront with 432k loan. Do you think 12k (compared to [c]) is going to make much difference to the purchaser for a house more than 1/2 mil??

At the end, human creativity will come out with an easy way out... Increase the price in the SPA by 10% (but in actual fact, the selling price is remained unchanged), which means SPA @ 660k, but actual price @ 600k. Purchaser has to come out with 20% of 660k, minus off the 60k, hence 72k upfront with 528k loan.

Summary of the scenario as below

SPA vs Selling $ Upfront $ Loan Amt
================ ========= ========
b) 600k / 600k (10%) 60k 540k
c) 540k / 540k (20%)108k 432k
d) 660k / 600k (20%) 72k 528k

We know (c) is a little unlikely for the owner to sell, but even if this is possible, comparing (b) to (c) is also difficult for purchaser to bite.

The above will lead to SPA price increase (d), hence the evaluation of the properties will still go up.

Now, if the above really happens, looks like the government has to go after the property evaluation profession, ie. lowering down the property value. However, do remember that if the property is evaluated downwards, it is not just going against moving Malaysia into high income country, but many big corporate will be in deep shape when the bank started to recall partial of the loan hence NPL. This will cause major havoc to the entire country, if not the world.

My point is, economy is an art, and let's think about this in various expects, and not just pushing for 80% (or even lower) and hoping that everything will go back to normal.

September 9, 2010 at 11:23 AMtan

I guess the gut of condo is out there. With the unfavorable conditions imposed, the Buyer are in better position now.

September 9, 2010 at 12:20 PMong

I find the below reasoning most sensible and logical .....

Star newspaper, 8 Sep 2010

Be realistic with housing loans

REFER to the report “No to 80% mortgage cap on housing” (The Star, Sept 6). Like all policies, it is best that this proposal to cap the mortgage percentage be discussed in a more holistic manner.

First, we must realise that loans are debts one incurs, not income earned. The higher the loan amount, the higher will be the monthly repayment and the less will be available for savings.

We should be careful to argue that if the loan amount is capped, the ability of many house buyers to come up with the initial down payment will be adversely affected. This is not entirely true.

The ability to buy a house is based on one’s income vis-à-vis the price of house. It is not solely dependent on how much loan one is able to raise.

Right now, I believe the price of houses is out of sync with the income of an average Malaysian. Hence banks have to come up with higher loan-to-value ratio and the repayment period has also been lengthened to a ridiculous span.

But as house buyers, we have to ask ourselves how many years we need to pay to have a roof over our heads.

Seriously, if we need a bank to lend us 100% of the value of the house and if we need a repayment period of more than 40 years, chances are our income is too low or the price of the house is too high, or both.

Insisting that the banks lend us a loan amount that we can ill afford to repay will only increase our default rate and make our future disposal income even smaller.

Part of the reason why the price of houses has escalated is due to easy credit and the ridiculous repayment periods that are made available. I remember in the 1970s and early 1980s, most buyers had to come with 30% down payment when they wanted to buy a home and the repayment period was usually restricted to 25 years.

Therefore, the proposal to cap the mortgage to 80% (i.e. with 20% down payment) of the value of the house and if possible the repayment period be restricted to 30 years are appropriate measures to ensure a more realistic price level in line with the income level of Malaysians.

Just before the 1997/98 financial crisis, I remember Bank Negara also came up with a number of measures to cool down the housing and stock markets at that time. When the measures were announced, the market participants, like now, were up in arms. Because of their protests, many of the measures were watered down. Subsequently, the crisis came and the rest is history.


September 9, 2010 at 12:55 PMUnknown

Good one, Voice.

To me, selling & buying real properties is an art, we tailor-make, engineer & design the deal/transaction by capitalizing on the ruling/regulation in place that to our advantages and make profit out of the nearly impossible and unfavorable conditions.

Rule and regulation is dead thing, we human with smart brain always able to be flexible to adapt to and take control of every situation that may come.

Nothing can stop a smart investor from making money if he is determined to do so, not loan capping @80%, not hefty real property gain tax, not stamp duty, the list goes on...

Just quote Voice's table:

SPA vs Selling $ Upfront $ Loan Amt
================ ========= ========
a) 600k / 600k (10%) 60k 540k
b) 540k / 540k (20%)108k 432k
c) 660k / 600k (20%) 72k 528k

Under scenario b) we upfront a lil bit more, but monthly installment would be less (interest paid less also). Better still.

Under scenario c) we jack up selling price to loan more, just have to pay a lil bit more for stamp duty and supplementary agreement, no big deal.

September 9, 2010 at 2:41 PMUnknown

above is a hardcore speculator ! susah orang macam ini ....

September 9, 2010 at 4:43 PMDD

scenario c) mentioned by engineer, hard to be done if the buyer buys from developer. For sub-sale, the seller will have to pay higher RPGT unless seller hold it property for more than 5 yrs. Not sure if speculations are active on properties that are more than 5 yrs old.

September 9, 2010 at 8:10 PMjeremy tan

No matter how we try to temper with the market, it will eventually have its way of correcting itself.

If true demand does exist, the boom will be sustainable. Either wise the bubble is going to burst.

I am all up for a free market.
My proposal would be:
Instead of having all the ratio to loan bullshit and taxes, the banks should be screening the buyers appropriately before approving the loan to them.
The government can appoint an auditor to audit the banks. Something like a stress test to keep them in check.

If you don't deserve the 10:90 loan, the bank shouldn't give it to you.
If you can't afford a property in Penang, there are plenty of options in Seberang prai, Buki Mertajan and Butterworth.
You can get bungalows at RM500,000 at certain areas.
If you can't afford to stay on the island, the market will tell you to move to the mainland.
It is important that we embrace this, so that mainland will develop as well. If everybody wants to stay on the island, the prices will never come down.
It is demand, you can't stop it. You can counter it by choosing to stay at mainland.
All of you are after all consumers, you have your rights. If the price is not right just move next door.
I am a strong believer of perfect competition. The market will decide who deserves to own more than one properties.

You can set all kinds of policies to slow the boom but if you don't stop foreigners from buying, the prices will continue to sky rocket.

To be honest, you can't stop foreigners from buying. We need them and their FDIs to keep our economy a float. We need their money to develop Penang.

It is a catch 20 situation.

Implementing all sorts of policies will just give more options for people to capitalize on.

September 9, 2010 at 10:04 PMVoice

I'm in total agreement with Jeremy Tan.
Nobody can stop the free movement of the market.

The tree will grow upwards as long as the sunrises towards on top of our head. Even if you put a shade over the tree, it will find its way to bend side way to catch the sunlight.

We shouldn't admire the banking facilities in the old days (70% ??), as life is different those days. Things were much cheaper, and likewise income were much lower. Most of our ancestors were on bicycles (if not on foot). Every bus had a driver and a conductor during those days, but now the LRT can run even without a driver. Even a plan can be auto-pilot.

In fact, we should be thankful that the current banking system is enabling most of us to own a roof over our heads. Those who are able to have more roofs is their capability.

As we are moving towards a high-income Malaysia, we should not just hoping to get increment to our pay by doing nothing. Neither should the Government just strengthen our MYR against USD. Instead, we should be focusing on how Malaysian can further improve our skillset to take on more value added with higher technology industry to justify for higher income.

Standing still at where we are now, and crying for price increment (due to banking, government, or even foreigner) will not help us in anyway.

Measure can be taken, but all these are short term. When the measure is removed and the gate is opened, the water will still cause the flood and harm us if we are still not prepared.

September 10, 2010 at 1:07 AMDaamao

I admire your optimism.

1. The tree will grow upwards as long as the sunrises towards on top of our head.
> well the law of nature certainly did not apply if u compare the growth of salary vs property.

2. As we are moving towards a high-income Malaysia,
> Wishful thinking i suppose. Malaysian income has been having a negative growth if factor inflation, and particularly, property price.

Property price has "inflated" >50% in a few years, ask yourself if your salary has got even close to such growth rate. Ask the average Malaysian Joe if his salary has got even close to such growth rate.

What happens when the gap between property price and salary increment is getting larger by the days is, the average Malaysia Joe will chase the commodity, fearing "it is now or never".

Given such sentiments, the developer will be more than happy to let you join the party, and they all hold hands and laugh all the way to the bank.

This is a game of musical chair, the last person standing when the music stops lose. And the music will stop soon.

September 10, 2010 at 7:30 AMjeremy tan


The Law of Nature certainly did apply.
If you can't afford a home in Penang, you will just have to move to the mainland.
The Law of Nature says that your profession does not dictate a higher salary that allows you to obtain a 10:90 loan or maybe even any loan to purchase a home on the island

If the property prices gets over inflated and it is not supported by strong fundamentals, than the bubble will burst.

Liquidity will run dry for there is no more money to be pump into this sector.

At the end of day, the law of nature will ensure perfect competition and choose those who can afford to own a property

It is a free market. It has always been that way.

No matter how much interventions you throw at it, it will find its way to correct itself.

All you can do is to make sure that the banks are doing a proper job in giving out loans to the people. They should be audited from time to time

There are plenty of affordable homes at the mainland.
With only RM250,000 you can own a landed property already.
If all of you choose to stay on the island, the prices will never come down. It is demand. Everyone wants, so the prices goes up.
Buy a home at mainland, work hard and maybe one day you are able to finance a home on the island.

September 10, 2010 at 8:20 AMDaamao

I can afford a home on the island, I am not buying the idea of getting a home on the island for the following reasons,
1. as you have said: If the property prices gets over inflated and it is not supported by strong fundamentals, than the bubble will burst.

2. as you have said: Liquidity will run dry for there is no more money to be pump into this sector.

3. "Buy a home at mainland, work hard and maybe one day you are able to finance a home on the island." - well, you are still neglecting the fact that the salary is lagging behind the property growth. Few % of population may be able to afford to stay in Penang, but when you apply the law of nature, you need to consider the masses, and consider what happen if this gap continue to widen.

I fully agree the law of nature will dictates that the day will come when the masses can no longer afford over inflated property, they will decide to stay out of this rat race, and stay on mainland, especially after the 2nd bridge is up.

That''s when the music will stop. And we will be hunting those that does not have a chair, and can't afford to stand too long. After all, that is the law of nature.

September 10, 2010 at 8:42 AMVoice

Hi Daamao,

I think you missed one important point here, which is that Malaysian has to find our own ways to increase our pay by doing something more relevant and in the forefront of the economy growth.

Most of the sizable factories in Penang had already outsourced their labor-intensive manufacturing to the CM. Today, some of the CMs are still in Penang. Will these CM moves themselves to cheaper countries? Intel had setup its R&D Center in Penang, but what's going to happen to these R&D Centers. What can the general Malaysian do above and beyond this?

Well, I agree that this forum is not meant for the above questions, but I think these are definitely part of the economy, and relevant.

There is no point stopping the growth or blaming on others (foreigners) as globalization train has started moving since the invention of INTERNET, and this was brought up during Dr. M's era.

I blame myself for not taking the word "globalization" seriously and assessing the impact during that time, and that's why I'm also struggling like most people today.

I just feel that capping to 80% is not D way, and it has to be done very carefully. Malaysia is lucky that removing our MYR capping to 3.80 against USD didn't caused major economical impact like what happened to Argentina.

Likewise, assessing the impact of putting the 80% capping on the loan and then removing later has to be serious thought thru, and not just agreeing to it due to "greedy developers", "bulk purchasers/speculators", "foreign investors", etc... Those are giant with deep pockets, and they can just pull their fund away to somewhere else easily anytime.

I wonder if they will be affected by all these measures, but the general Malaysian will definitely do.

September 10, 2010 at 10:04 AMtan

Hot & interesting debate...

September 10, 2010 at 11:49 AMDD

Gov should really look at allowing larger % of EPF withdrawal for downpayment and housing installment. Not just blindly follow others by imposing 80% loan cap but not looking at measures. Every Singaporean can own a house because they are allowed to use 100% of the CPF to finance the 1st home. But this measure would mean, some gov officers or ministers will have less overseas vacations, luxury cars and bungalows.

September 10, 2010 at 8:24 PMTiger

There is a good article on Malaysian Property Bubble in the Malaysia Finance Blog.

September 11, 2010 at 1:14 AMDaamao

"Malaysian has to find our own ways to increase our pay by doing something more relevant and in the forefront of the economy growth."

I share your sentiments. You can do this alone, or have 5% of the workforce contributing 70% of the income taxes.

The fact remains, these 5% of population has no problem putting roof over their heads.

But the government need to take care of the remaining 95%. so 2 things has to happen
1. cost of affording homes need to be regulated,
2. this should be regulated w.r.t. our ability to afford homes.

I am not saying the cap on loan is the best solution. I am saying the property price need to be regulated, by any means necessary, the sooner the better.

As we speak, an average Joe would need to take a loan tenure 25 - 30 years.

For an average Joe that is lucky to have a bachelor degree, loan tenure of 30 years is a long as his entire career.

Assuming the poor fella earn a handsome starting pay of RM3000/month, and take a loan of RM300k over 30 years, he would have to set aside RM1800 per month, representing 60% of his gross pay.

Most of us would start with a car, would wait for at least 5 years, before taking a housing loan. For a 30 years tenure, the repayment will be well into his 60s.

That is, unless he speculate in property market and make a bucket, just like how the developers like everyone to think so.

Do the math. A sub-prime crisis is looming, if not already here.

Imaging the consequences of government not acting enough, and soon enough, or for a quicker answer, ask Uncle SAM.

September 11, 2010 at 7:03 AMalan

I tend to believe the risk of property bubble bursting is high when there following 2 scenario observed.

1) There are a lot of experts (Developers, Agents, Associations...etc) start to come out to comment about the current market recently (in newspaper and TV news). We did not see this in last year.

2) Everyone starts talk about property bubble in wet market.

If you are not in urgent need to buy property, you should wait and see.

September 11, 2010 at 7:32 AMjeremy tan

Dear Daamao,

I do agree with you in regards to the issue of wages that majority of the Malaysians are facing.

Then let me ask you, how do you expect our salary to increase when we are so incompetent as a country.

Seriously, without oil and gas i don't really know how our economy is sustainable.

How many percent of our work force consist of professionals?

How many percent of Malaysians are willing to work hard?

How many Malay, Chinese and Indians are willing to contribute?

At least now we have the poor, the middle income, the rich and the filthy rich. If it was 15 years ago, it would be the very rich and the very poor.

Bumiputra rights at the same time does not encourage healthy competition. It is a policy that encourages the biggest speculation ever.

Do you know why Singapore is so successful, its because of the people who stays there. It is an undeniable fact.

How successful a country is depends on the character of its citizen there. Since at a young age, Singapore has been recruiting the smart intellects from all over Malaysia under the Asean scholarship. It is what i call brain drain. I am not surprised for a Singaporean to be earning 12,000 singapore dollars a month since the age of 24.

Why can't we earn the same amount as Malaysians? That you will have to ask yourself.

How many shopping malls in Penang are already owned by Singaporeans. To name you a few, Gurney Plaza, Island Plaza and Giant along burma road.

Without FDIs, your wages will only be lower. Maybe you will be unemployed as well.

Property prices and wages are related. However, they should be addressed separately.

The government can help by providing incentives for first home buyers.
If you implement the 80% cap, the first home buyers will be affected the most.
Government encourages people to invest in houses by allowing them to withdraw more of their EPF and now they want to place a cap on it. We are back at square one you see.

Another thing we have to take into account is that we Asians are very thrifty.

The sub prime crisis happened in America and other parts of Europe is because they spend more than they can afford.

For us Asians, our house is basically our life savings.

The tsunami of cheap credit that rolled across the planet between 2002 and 2007 has just now created a new opportunity for disaster.

The credit wasn't just money. It was temptation. It offered the entire societies the chance to reveal aspects of their character they could not normally afford to indulge in.

The Americans wanted to own homes far larger than they could afford, and to allow the strong to exploit the weak

Hence, the best way to avoid a bubble is to have tighter regulations with the banks. Make sure the banks are doing a good job at screening its clients. Audit them from time to time.

Make sure that those who are buying are genuine buyers and investors who can afford repayment.

As for our wages, to enable us to achieve a high income society, we will have to an intellectual society that will be able to participate with globalization. Education is very important.
How many percentage of Malaysians are receiving proper education?
How many percentage of Malaysians are interested to further their studies?
We are not by ourselves now. Everything in the world affects us one way or another. Globalization is something we can't deny.
Lets be practical, if i employ a monkey without a degree, how am i suppose to pay him more.

If i employ a fresh graduate, a charted financial analyst for example. I won't mind paying him Singapore dollars 12,000 a month since he/she can bring in more than i pay him/her

Facts of life...
Life is a market, it reflects the opportunity costs from the decisions we make in the past.
Markets have ways of correcting itself.
Maybe a bubble is all we need to correct the housing market. Who knows.


September 11, 2010 at 9:17 AMsad

Capitalism fail!!!!! Look at US and the fails!!!!!! Lets change to communism or socialism....

September 11, 2010 at 9:31 AMDaamao

I agree with almost all that your have said. And what you have said supports the bubble theory,
- that we as a nation can no longer to put roof over our heads in KL and Penang.

"The Americans wanted to own homes far larger than they could afford, and to allow the strong to exploit the weak"
> well well, it is happening here. Malaysian is flocking to buy property they cannot not afford, either thinking "it is now or never", or "let's make a bucket". These are the ones that are most susceptible to a melt down. Yes we need FDI, but is FDI on property needed? What are the implication of such FDI to Malaysian's ability to afford homes? When a melt down occur, who (the FDI, or the Malaysian) is more likely to get caught?

These, are the fundamentals of why government need to regulate property growth, by any means.

A smart government need to consider the facts, and understand his objective clearly, so sensible action can be taken.

If the fact says bubble is caused by speculators, then the objective must be to regulate such activities.

If the fact is 1st time house buyer cant afford the 80% cap, then he objective must be to apply policy to facilitate 1st time home buyer with the means. Yes 90% cap for 1st time home owner will work. Why not consider tax breaks.

I am not a economist, but I expect the government to have such experts that can come out with effective countermeasures. Otherwise, the wishful thinking of a high income nation is the ruling government's trick of getting your vote for at least 2 more terms, because it is not going to happen.

"Hence, the best way to avoid a bubble is to have tighter regulations with the banks. Make sure the banks are doing a good job at screening its clients. Audit them from time to time."
> Banks are run by assholes. I have no hope on these scumbags and I applause the hell suffered by the like of Citibank, BOA, even AIG. The world is a lot better without these greedy SOBs running around sucking bloods from people, and sucking more blood when they run into trouble.

September 11, 2010 at 2:17 PMTiger

We can learn (or unlearn) from experiences in other countries. And remember, we are lamenting the fact that Penang and KL property prices are sky high. but remember there are other affordable adjacent areas to consider. Its understandable for people to want to invest in proven and familiar places, and near convenience. But consider the early settlers and pioneers in the US during 18th, 19th century who ventured westward to open up new land, braving hardship and danger. Of course, we don't have to dodge arrows nowadays :), but its not dis-similar from the present day. Today, Sungai Nibong and Pantai Jerajak (near Queensbay) are sky high in prices. But 30 years ago, these places were considered "ulu" and isolated from civilisation. To put it mildly, people who bought in these areas were considered "unwise". Now they are laughing all the way to the bank. Of course, if you are speculating and want profit in the short term, this strategy does not work. But if you are genuinely looking for shelter over you and your family's head, do consider this.
The government can help by investing in basic infrastructure in up and coming areas to make them more desirable.

September 11, 2010 at 5:12 PMDaamao

I just came back from a show house.

It was a 400k property. Developer is pitching the following
- initial down payment 20k,
- no payment during the construction period (3 years)
- by the time the property is completed, it would have appreciated at least 30%, and i will gross 100k profit, on an investment of 20k (500%).

I'm sure you have heard it before.

Great idea, isn't it?!

September 11, 2010 at 10:25 PMjeremy tan

Najib warns against relying on subsidies
Relying on subsidy will give a false sense of being competitive, Prime Minister Datuk Seri Najib Tun Razak said today.

"You (private sector) must be competitive because you are more productive, innovative ... and because you made the right kind of investment, developed the right kind of talent," he said.

These are the key factors that will enable the nation to compete globally, he said.

"Relying on subsidies gives you a false sense of security because the day of reckoning will come when subsidies will be removed eventually," he said in an interview with CNBC Asia's Martin Soong aired today.

Najib, who is also the finance minister said that the government is focusing on not just eradicating absolute poverty, but looking at the 40 per cent of the population -- the more vulnerable group, the groups that are financially stressed at the end of each month.

"We have to do something for them, for these people. So when we remove subsidies gradually, we have to look in terms of increasing the income level. We have to look in terms of ensuring a wider social safety net, and so forth. So there are measures, which must be put into place," he said.

Acknowledging that there had been a misallocation of resources, he said, for example, people who own luxury cars should not enjoy subsidies.

Therefore, there should be a targeted way of reducing subsidies.