Difficulties in getting a loan will continue…. 2019

This morning, I gave a talk on “8 tips to closing more sales” to a group of real estate negotiators. One of them was telling the other that their CEO is busy because he will be delivering a speech in the MIEA event. After the event, I read an article shared by my good friend Michael Geh. Now I know where the CEO of this group of negotiators went. He went to the MalaysianAnnual Real Estate Convention 2017 (MAREC ’17). This is an annual event organised by Malaysian Institute of Estate Agents. This is the full article in Theedge that was shared in the Facebook page of my friend, Michael Geh. It was about the talk by CEO of Smart Financing, Gary Chua during his talk in the MAREC ’17. His topic was entitled, “Unlocking Top 7 Financing Secrets & Strategies And Property Market Outlook for 2017.” Gary shared that loan approval rate is already at its lowest within the past 10 years and this will continue for 2017 and there would be no changes until 2019.

Bank Negara Malaysia’s data showed that the approval rate for residential property loans was about 42%, while the rate for non-residential property loans was about 40% as at Oct 2016. He also shared that the reason is because with the current lending policy in place, Malaysia is still one of the easiest places in the world to get loans. With Malaysia moving towards becoming a developed country, the lending policy would become stricter. He shared that countries such as Hong Kong, China, Taiwan, Singapore and Japan has more stringent lending policies and Malaysia is also moving in the same direction. One major financing strategies he shared so that we can continue to obtain loans would be to maintain a good credit profile. In other words, whatever debts we have, always pay on time. I think this includes even if we intend to just pay the minimum amount for our credit cards. He also shared that if we should issue cheques, we should make sure it does not bounce back twice within two months as this record is kept in the system of Biro Maklumat Cek for 12 months. This will impact our credibility. Full article in TheEdge here. 

I think if I am there, I would ask if this strict lending policy is also applicable for developed nations like the U.S and Australia. Just last week my friend who’s now an American resident shared that home loan requirements are very stringent in New Jersey. I asked if this is after the 2008 mortgage crisis because one reason for the crisis was due to easy loan approvals. She said she does not know. Well, since it’s now really tough to get loans, perhaps this is a good sign that the 2008 crisis will not happen again. As for Australia, I also hope that they maintain strict lending guidelines because as at Q3 2016, its household debts vs GDP is already 123 percent. I do not think it’s wise to have household debt growing ever faster than the GDP. Source: TradingEconomics. The Australian economy is expected to grow 2.6 percent in 2017. This is an estimate by the International Monetary Fund (IMF). 

Personally, I take this as positive because I do not wish for any financial crisis to start from within our very own banking sector. However, it is also fair to note that with the way the newer generations are spending their money, they will face more difficulties in securing loan approvals. There’s too many material temptations and yes, the peer pressure to try and outdo one another with almost the same incomes. Only when we improve our ‘credit profiles’ as per advised by Gary that it would be easier to obtain loans. Let’s start perhaps by also reading Gary’s site here or my good friend who’s a personal finance guru, KCLAU.com Happy investing and getting our loans approved.

written on 4 Mar 2017

Next suggested article:   Loan rejection, who’s fault?

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