KRI: Bank Ne­gara do­ing the right thing

The Sun (Malaysia) - - FRONT PAGE - BY EVA YEONG sun­[email protected]­

KUALA LUMPUR: Re­lax­ing lend­ing guidelines to achieve prop­erty sales is not the right way to tackle the is­sue of af­ford­abil­ity, said Khazanah Re­search In­sti­tute (KRI) di­rec­tor of re­search Dr Su­raya Is­mail.

“House prices should go down first, then fi­nanc­ing will be bet­ter. You can’t make mort­gages the in­no­va­tive way of mak­ing house prices more af­ford­able, by just con­cen­trat­ing on mort­gage pay­ment. When house prices go down, fi­nance will take care of it­self,” she said in an in­ter­view.

She said Bank Ne­gara Malaysia is do­ing the right thing by main­tain­ing the strict lend­ing guidelines for banks, in view of the house­hold debt level.

Ac­cord­ing to her, mort­gage should not be so ac­ces­si­ble that it in­creases the debt as well as the value of the house.

“I’m not a firm sup­porter of rapid price es­ca­la­tion be­cause I think that in and of it­self is hit­ting the econ­omy, and it’s a price as­set bub­ble, it’s the start­ing point. What we want is proper, real gains from prop­erty ap­pre­ci­a­tion,” she added.

Back in 2009, Malaysia’s hous­ing sec­tor saw a very rapid price es­ca­la­tion due to “flip­pers” who pushed up the trans­acted prices in the sec­ondary market, which dic­tates the sell­ing prices of new stock, re­sult­ing in a bloated market.

“It’s all bloated and then you have the fi­nance sup­port­ing this. This is wrong. House prices must come down first, be­cause it was too rapid; we had to flat­ten it a bit,” Su­raya said.

She ex­plained that if prices es­ca­late rapidly, home own­ers may not be able to af­ford to up­grade or af­ford the same qual­ity in fu­ture as prices would have spiked too much. How­ever, a grad­ual in­crease in price would en­able fam­i­lies to still af­ford a de­cent house 10 years later.

“What we want is, for most peo­ple to have a proper stag­gered type of prop­erty own­er­ship. So, at this level, you buy RM200,000. Once you are in your 50s, hope­fully you can buy an­other house which is RM400,000. But our fig­ures have shown that one fam­ily will hold on to that house for about 37 years. Mean­ing, they can’t go up the prop­erty lad­der. That’s how bad our hous­ing market is,” she said.

She said the in­abil­ity to move up the prop­erty lad­der is a bad symp­tom of an in­ef­fi­cient hous­ing market.

Mean­while, un­sold homes in the market should be left to market forces and devel­op­ers should re­spond ac­cord­ing to market de­mand, by sup­ply­ing the type of homes that Malaysians want.

Su­raya noted that some devel­op­ers who un­der­stand market re­sponse have re­duced their sell­ing prices, with prod­ucts priced around the RM200,000 to RM220,000 range in Se­lan­gor.

“That was done with­out cross­sub­sidi­s­a­tion be­tween the ex­pen­sive prod­ucts that they sell and the ones they do for af­ford­able hous­ing. So that’s great. I’m not say­ing they should do so­cial hous­ing; so­cial hous­ing is un­der the gov­ern­ment. Just con­cen­trate on the mid­dle range,” she said.

In or­der to tackle in­ef­fi­ciency among firms which has led to sky high prices, Su­raya rec­om­mends the build-then-sell (BTS) con­cept, which she said would in­stil dis­ci­pline among devel­op­ers.

“If we prac­tise BTS, the over­hang will be less be­cause there is dis­ci­pline there. You must re­ally pro­duce prod­ucts that peo­ple want and you would not take all the un­nec­es­sary risks (such as build­ing too many units or un­suit­able homes).”

Re­call that the BTS con­cept was sup­posed to be im­ple­mented in 2015 but the idea was later scrapped. The Na­tional House Buy­ers As­so­ci­a­tion has been push­ing for the im­ple­men­ta­tion of the con­cept, which it said would ad­dress the is­sue of aban­doned hous­ing projects.

Su­raya said the gov­ern­ment should also in­cen­tivise devel­op­ers to in­vest in re­search and de­vel­op­ment, which would strengthen the firms, mak­ing them leaner and more ef­fi­cient at pro­duc­ing homes.

“That is the real in­cen­tive pol­i­cy­mak­ers should give … the pil­lars of de­vel­op­ment need to be in­cen­tivised, not the out­come. This is all short-ter­mism.

“What we want is proper long term so­lu­tions to make house prices go down in a way that it can and it should.”

Newspapers in English

Newspapers from Malaysia

© PressReader. All rights reserved.