theSun Property March 2017

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theSun ON FRIDAY | MARCH 11, 2016 24 theSun ON FRIDAY | MARCH 10, 2017
>Comments and observations of key players
at iProperty.comMalaysia and Brickz.my
Views on property
coolingmeasures
VARIOUS coolingmeasures
introduced by the
Malaysian government and
Bank NegaraMalaysia
(BNM) to help curb escalating
property prices has had little
impact, said iProperty.com
Malaysia and Singapore CEO
Haresh Khoobchandani. Together
with Brickz.com, the company
analysed data fromBNMand the
Valuation and Property Services
Department of Malaysia (JPPH) to
examine if the measures introduced
over the years actually impacted the
residential and financial markets.
theSun reports the study conducted.
“From the data we got, we saw
that prices for residential property
inMalaysia had been sky-rocketing
since year 2000. Between 2008 and
Q2 of 2009, following the sub-prime
mortgage crisis in the US, which
affected economies around the
world, house prices experienced
nearly no growth. The number of
loans approved for residential
properties also decreased the same
year as themarket moved funds
away from the softening real estate
market,” Haresh said.
Based on figures in theMalaysia
Residential Loans andNational
House Price Index (HPI), it was
learned that the annual quarter-on-
quarter national HPI began to
increase the highest from 2011-Q1 to
2012-Q1.
In 2011-Q1, the HPI was at 149.1,
while in 2012-Q1, the HPI was at 167.
Thus, the difference shows an
increase of 17.9 index points in 2011.
For the same period, performance
for residential loans approvedwas
stable at RM20.4 billion. The data
showed that the quarter-on-quarter
HPI had slowed down to a growth
of 15.3 index points between 2015-Q1
and 2016-Q1. Performance for
approved residential loans also fell
2007
It was reported that in 2007, the
Developer Interest Bearing
Scheme (DIBS) was first introduced
by a property developer in
Penang, as a precursor to the
Built-Then-Sell (BTS) 10-90
concept stated in the Housing
Development (Control and
Licensing) Regulations, 1989
(amended 2007). At that time, the
demand in the real estate market
was high and property developers
were offering creative products
andmarketing schemes to attract
house buyers. It can be observed
that the total housing loans
approved went up by 59.57%
(RM5.07 billion) for quarter-on-
quarter change in 2008 Q1
2008 TO 2009 Q2
House prices in Malaysia only had
a growth of 0.9 index points in
2009 (Table 1) during the sub-
prime mortgage crisis in the US
which also affected economies
around the world. It can also be
observed that the amount of loans
approved for residential properties
suffered a contraction. In the same
year the total housing loans
approved fell by 14.13% (RM1.91
billion).
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drastically by RM5.6 billion from
2015-Q1 to 2016-Q1. HPI however,
continued to rise despite a drop in
the amount of residential loans
approved since 2014.
“In our opinion, the drop in loans
approvedwas contributed by all the
previous interventions introduced
by BankNegara and the
government. The interventions
did not reduce the property prices
but did slowdown the growth,”
Haresh said.
Brickz.my founder Premendran
Pathmanathan, who is also
iProperty.comMalaysia’s data
services general manager said that
themeasures introduced by the
government, including removal of
the Developer Interest Bearing
Scheme (DIBS), had actually
decelerated demand.
“Other factors that could also put
tha brakes on demand could be due
to the changes in real property gains
tax (RPGT), revision in loan to
value (LTV) curbs and also the
introduction of the Goods &
Services Tax (GST). Aside from
this, the global uncertainty,
weakening ringgit, and change in
price (drop) of oil and gas has also
played a role in this as well,”
Premendran reasoned.
“The DIBS scheme only required
an initial payment of 5%or 10%of
the property price. So, purchasing
property became an attractive
option for investors. It was likely
that the increase in the price of new
properties from 2011, were the result
of speculative buying due to the
scheme,” Premendran said.
Haresh however, felt that the
coolingmeasures had actually
impacted the financial sector and
also reduced negative sentiments of
the oversupplied housingmarket.
“If you look at the data, the price
index for houses continued to climb
at double digit rates, by 15.3 index
points in Q1 2016, while the financial
sector on housing loans fell 23.24%.
The various measures introduced
appeared to have consolidated the
financial sector and reduced the
negative sentiments of the
oversupplied housingmarket,”
he said.
“It is unlikely that prices will
decrease, instead likely to stabilise
or increase at a slower rate in
coming years. This is primarily due
to the fact that we have a growing
young adult population and this is
driving the demand for property,
which in turnwill continue to place
upward pressure on prices.
“With the real estate industry
now consolidating, the industry
may shift their focus toward
developments that apply to
affordable living. Infrastructure
such as transportation, energy and
social infrastructure will help to
increase economic efficiency and
reduce the cost of living, thus
making locations that once
seemed expensive to live in now
more affordable.”
In all, Haresh believes the above
is why property buyers and
investors are adopting a cautious
approach and are being very
selective inwhere andwhat they
choose to purchase. “There is
increased demand for affordable
homes, particularly through a
growing, young population looking
for properties in the major urban
centres. “WhileMalaysians are
concerned about the rising house
prices and affordability, property is
still viewed the most attractive
investment choice and this is due to
capital growth opportunities. It is
alsomore stable compared to other
assets,” he said.
[Information and images from
iProperty.com]
2010
InNovember 2010, BankNegara
Malaysia (BNM) implemented the
policy of amaximum loan-to-value
(LTV) ratio of 70%, whichwill be
applicable to the third house
financing facility by a borrower. The
policy aimed at moderating the
excessive investment and speculative
activity in the residential property
market.
2011
It is strongly believed that the
increase in the prices of newly
launchedproperties (primarymarket)
beginning in 2011 are the results of
speculative buying. At that timeDIBS
was popular amongproperty
developers to attract ordinary house
buyers. The scheme alsomade it
cheap for speculators to earn
relatively large profits because it only
warrants an initial 5%or 10%of
property price and two to three
years’ time period for them to sell the
investments. FromApril to July 2011,
BNMhas raised the Statutory
Reserve Requirement (SRR) Ratio
three times to 4% from1%. It is
observed that therewas a large shift
in global liquidity which resulted in
significant capital flows into
emerging economies, particularly
theAsian region. The decision to
raise the SRRwas undertaken as a
pre-emptivemeasure tomanage the
risk of this build-up of liquidity. From
Table 1, annual quarter-on-quarter
national House Price Index (HPI)
began to increase the highest from
2011-Q1 to 2012-Q1. In 2011-Q1, HPI
was at 149.1, while in 2012-Q1HPI
was at 167. Thus, the difference
shows an increase of 17.9 index
points in 2011. For the same period,
performance for residential loans
approved ismaintained at RM20.4
billion.
2012
In January 2012, BNM issued
guidelines requiring financial
institutions tomake appropriate
enquiries into a prospective
borrower’s income after statutory
deductions for tax and EPF, and
consider all debt obligations in
assessing affordability. The
guidelines promote better
protection for financial consumers
and a sustainable credit market. The
government has also revised the Real
PropertyGains Tax (RPGT) to 10%
from5% for properties held and
disposedwithin two years as the
previous rate of 5% is not effective in
curbing real estate speculative
activities. The government have also
expandedMy First Home Scheme to
help those earningbelowRM3,000
by increasing the limit of house prices
qualified to RM400k fromRM200k.
The scheme is available to house
buyers through joint loans of
husband and wife. At the same time,
the high sovereign debt within the
Eurozone was posing a threat to
global economies. It started in 2009
whenGreece was at risk of
defaulting its debt. There were
allayed fears that Malaysia’s current
government debt toGross Domestic
Product (GDP) ratio of 53.3% in 2012
was vulnerable to any economic
collapse from the Eurozone.
Malaysia’s government debt toGDP
ratio has always hovered below the
limit of 55% since 2010. Meanwhile,
the country’s gross external debt
which includes external offshore,
public enterprises and private
sectors loans) toGDP ratio has been
rising from62% (RM602 billion) to
72.1% (RM833 billion) from2012 to
2015.
2013
Loans approved for residential
properties climbed in 2013. In
November, BNM issued guidelines
to banks tightening lending
practices which include abolishment
of Developer Interest Bearing
Scheme (DIBS) and enforcement of
stricter LTV ratio calculations, while
the government imposed a higher
RPGT at 15% for properties held and
disposed within 2 years and 10% for
properties held and disposed
between two to five years.
2014
It can be observed that following
the counter measures taken in 2014
such as revision of RPGT and curbs
on LTV ratio, the amount of loans
approved the following year in 2015
fell by 4.38% (RM1.11 billion) while
Q1 quarter-on-quarter change in
HPI for 2015 increased by 15.8 index
points (Table 1).
2015
In June 2015, theNational Higher
Education Fund Corporation
(PTPTN) began listing borrowers
who have never paid back their
loans into Central Credit Reference
Information System (CCRIS). It has
been reported that 30%of the loans
submitted in 2016 were rejected
due to applicant’s debts with
PTPTN. FromTable 1, quarter-on-
quarter HPI has slowed to a growth
of 15.3 index points between 2015-
Q1 to 2016-Q1. Recall earlier on that
in 2011, HPI increased by 17.9 index
points. Performance for residential
loans approved also fell drastically
by RM5.6 billion from2015-Q1 to
2016-Q1. HPI continues to rise
(moving towards right) despite a
drop in the amount of residential
loans approved since 2014.
Chart 1: Relationshipbetween loanapprovals andNational HousePrice Index (HPI)
U.S.sub-primemortgagecrisis
RPGTrevisionand
abolishmentofDIBS
RPGTrevisionandLVTratio
curbs GSTimplementation
PTPTNblacklisting
HPI=241.6
RM23.8bil
Q3
2016
2015
2014
2013
2012 2011
2010
2009
2007
2006
2008
MYR1millionlimitpolicy
forforeignbuyers
Eurozonesovereign
debtcrisispeaked
RPGTrevisionandhigherscrutiny
intoborrower’sincome
SRRraised3timesfrom1%to4%
70%LVTratiofor3rdhouse
financing
HouseLoansApproved (inRMbillion)
30
20
10
0
100 125 150 175 200 225 250 275
NationalHousePriceIndex(Year2000=100)
Source:BankNegaraMalaysiaandValuationandPropertyServicesDepartmentofMalaysia
Table1:NationalHPIandHousingLoansApprovedforQ1and
Year-On-YearChange
Period National
House
PriceIndex
forQ1
Change
National
HousePrice
IndexforQ1
HousingLoans
Approvedfor
Q1(MYR‘000)
Change inHousing
LoansApprovedfor
Q1(MYR‘000and
percentage)
2007 123.4 +5.7 8,516,435 694,703 8.88%
2008 128.7 +5.3 13,589,771 5,073,336 59.57%
2009 129.6 +0.9 11,669,915 -1,919,856 -14.13%
2010 136.9 +7.3 17,788,834 6,118,919 52.43%
2011 149.1 +12.2 20,363,494 2,574,660 14.47%
2012 167.0 +17.9 20,371,468 7,974 0.04%
2013 184.9 +17.9 23,985,479 3,614,011 17.74%
2014 202.7 +17.8 25,418,331 1,432,852 5.97%
2015 218.5 +15.8 24,305,339 -1,112,992 -4.38%
2016 233.8 +15.3 18,657,200 -5,648,139 -23.24%
Source:BankNegaraMalaysiaandValuationandPropertyServicesDepartmentof
Malaysia