Bank Negara Malaysia (BNM) had on 3 November imposed with immediate effect the maximum loan-to-value (LTV) ratio of 70% for the third house financing facility taken by a borrower as it seeks to curb “excessive investment and speculative activity in the residential property market”. The measure aims to support a stable and sustainable property market, and promote the continued affordability of homes for the general public as BNM had observed that specific locations, particularly in and around urban centers, have experienced faster growth in the number of transactions, in house prices as well as an increase in financing provided for multiple purchases by a single borrower.
Property consultant C H Williams Talhar & Wong opines that an over-heated residential market is a problem that should be tackled on a coordinated basis on several fronts and by other relevant government departments. For instance, Lembaga Hasil Dalam Negeri (LDHN or Inland Revenue Board of Malaysia) could impose stamp duty on houses bought and sold within 3 years to be payable by the vendor while the Ministry of Housing is encouraged to clamp down on developer’s sales tactics which aggravate speculation.
If the 70% margin cap is less effective than expected, CH Williams suggests that BNM introduce additional measures such as requiring buyers to prove that they are actually residing in the cities the property is purchased as well as increasing provisioning requirements for housing loans featuring “teaser loan rates”. Such loans usually begin with excessively low interest rate before it surges exponentially. It is also more prone to the risks of default in the long run when interest rates get more expensive.
Actions to Curb Speculation in the Region
Singapore 70% margin cap on 2nd home purchase; Stamp duty imposed on homes bought and sold within 3 years.
Hong Kong Raised stamp duty on luxury home transactions; Clamp down on developers’ sales tactics.
China Raised minimum down payment requirements; No loan for 3rd home purchase; Buyers to prove they actually live in the cities in which they are buying.
India 80% margin cap on all housing loans; 5 times increase in loan provisioning (0.4% to 2%) for home loans featuring “teaser loan rates”.