DIBS should be back but not for every price level.

Developer Interest Bearing Scheme (DIBS) is making a comeback was first mentioned some weeks ago. Recently, it was reported again. This time, I think the possibility is pretty good. The Real Estate and Housing Developers Association (Rehda) is engaging the government in a discussion on bringing back the developers interest bearing scheme (DIBS) but with limitations. Perhaps for first-time house buyers of a certain price. This was revealed by Datuk Soam Heng Choon when he was moderating in a property forum. Datuk Soam is also IJM Corp Bhd CEO and managing director.

Briefly, DIBS which allows a house buyer to pay a downpayment of between 5% and 10%, and the rest on completion of the property was banned on Jan 1, 2014 because it was deemed to encourage speculation. The same thing happened in Singapore when it wanted to fight against rising house prices. As soon as DIBS was removed, the property sales dropped. I think it’s clear that DIBS has allowed flippers to thrive and majority of everyone to lose their minds and buying at ever higher property prices because the downpayment was too little! Imagine buying a RM500,000 home and having to only need RM25,000 as downpayment.

Soam clarified something which is very important. He said that even though on an overall basis, Malaysia has a high household debt against gross domestic product of close to 90% only 50% of this debt were mortgage-related while in Singapore and the US, mortgage debt make up 74% of their household debts. His only warning is, “Curtail unproductive loans.” While I do agree somewhat but I would like to concur with Khazanah Research Institute’s Datuk Charon Wardini who said in the same forum that home ownership should not be achieved at the expense of high household debt. In fact, it’s better to build housing cheaper and faster using Industrial Building Systems (IBS), a housing construction technique used by the Chinese and a company in the Philippines. He also said something I have been telling many, RM500,000 is already considered a level which is no longer affordable for many.

I personally would like everyone who is renting to actually start paying for their own home. At the very least, everyone has something that they could turn into money when they retire and found out that the life expectancy is getting much higher! Secondly, even if we do not buy property, do we believe we would save the money or invest it in something better? The answer is a firm no for majority of everyone. When we have more money, we tend to have MORE wants. That’s why we should make ourselves a little poorer. Property is one such way where our needs are taken care of before wants. Happy investing and hopefully DIBS can help those who really need them.

written o 11 Apr 2016

Next suggested article: RPGT is still around, DIBS can come back

 

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