Bad debt concerns over property crowdfunding
> Experts decry yet another programme to provide financing rather than address affordability
PETALING JAYA: The property crowdfunding scheme is seen to be more beneficial to developers than house buyers with concerns on easy lending leading to worsening household debts, future subprime situation and property speculation.
Asian Strategy & Leadership Institute’s Centre for Public Policy Studies senior policy analyst Jarren Tam said although the property crowdfunding scheme has wellintended targets, it once again has the narrow focus of bridging financing for the lower-income group and is akin to previous policies of making credit markets more lenient.
“This will only lead to the worsening of household debt, which is already proportionately comprised of primarily mortgage payments. Hence it is not a particularly good policy for home buyers as it does not address the real problem of the property sector, which is the widening gap between income and house prices. A more holistic approach would be raising household income levels and reducing inflated house prices,” Tam told SunBiz.
Home rental platform Speedrent CEO Wong Whei Meng said the scheme appears to be pro-developer because it is only applicable to new houses.
“Why not subsale? Why only developers’ unit? There’s no freedom of choice but to buy developer’s unit. I can understand that the government is trying to solve the issue of property overhang but it shouldn’t be forced to only (buying houses of) certain developers.
“If it’s to promote home ownership, why do we allow buyers to rent it out?” Wong questioned, adding that the scheme should consider a no-lease period like affordable housing schemes or people may be buying houses that they do not live in for speculation or hoping it would appreciate in price.
Property blog kopiandproperty.com executive editor Charles Tan opined that more financing options are always good for potential house buyers.
“The property crowdfunding is a refreshing idea. As for solving the challenges of home ownership, there are many other ways and not just the financing part.
“Many buyers are unable to afford the property they want to buy even though there are over 35,000 unsold and completed units currently. Some of these units were also built in areas that the buyers do not favour or accept, yet. The issue of property supply mismatch versus demand is the main issue to be solved currently,” said Tan.
Knight Frank Malaysia managing director Sarkunan Subramaniam said the availability of property crowdfunding platforms will make property more accessible for first-time home buyers who may not easily qualify for bank loans but this may fuel overly lenient lending policies, potentially leading to future subprime situation, a lesson drawn from the US where home buyers with inadequate financial capacities were able to secure mortgages.
Sarkunan urged the Securities Commission (SC) to ensure fund managers are stringent in evaluating the profiles of borrowers in the entire ecosystem of property crowdfunding.
“There is also a need to prevent fund managers who may be tempted to quickly build a portfolio by lending to borrowers with compromised credibility. Subsequently, the funds’ portfolios should be reviewed regularly to ensure that investors’ investments are secure,” he said.
National House Buyers Association secretary-general Datuk Chang Kim Loong disagrees with the government’s decision to launch a crowdfunding or peer-to-peer financing scheme to “help people buy properties”, saying that Malaysia is facing a housing crisis where properties are too expensive in comparison to incomes.
“The crux of the problem is ‘affordability’ and not ‘lack of financing’ as there is adequate liquidity in the banking sector,” he said.
Chang said it is also unclear whether it is for property under construction or completed units. Also, if a buyer is unable to obtain a loan from a financial institution due to poor credit records or “affordability issues”, giving the same buyer access to “easy credit” via a peerto-peer lending scheme will encourage property speculation and bad debts.
“It also encourages the growth of property scams. Who is going to ensure the peer who invested will obtain returns? Who will enforce the lending arrangements? What happens in the event of default? Is the SC going to undertake additional duties? This is a legalisation of money lending without the need for a licence.”