Longer repayment periods not the best answer lah.

There are many reports about the willingness of banks to lend to first-time home buyers. Most of these reports are saying that the banks have stringent loan approval process. These are so stringent that most buyers could not get their loans approved. Well, the banks are not agreeable to this assumption. Actually, in 2016, the banks were actually giving out more loans to the property market than in 2015. In other words, they are lending. Banks are lending more to the property market; 8 percent higher than 2015 In fact many Malaysian banks are reporting good profits during their recent quarterly report. This shows that banks are still lending. Else, there is no way that they could increase their profits. When banks show better results, it’s a good sign 

There are now calls for the bank to consider two-generation loans. The article in freemalaysiatoday.com here.  This is said to enable the potential buyers to be able to get their loans approved. Sorry, I disagree with this proposal. The reason is very simple. There are still plenty of choices and in fact, with the number of affordable high-rise units being built today, we should start to see a more stable market within a few years’ time. These affordable units of RM300,000 or thereabouts were built and aimed at first-time home buyers who must buy a new unit instead of scouring the secondary market for available units. There’s little need to debate. Just go to any major property site, search for properties within RM300,000 and we will find choices. Perhaps not the choices we want but the problem with the market today is that everyone just want to buy where everyone wants to buy. Funny but true! Anyone buying out of these usual areas would be asked, “Your area not far away meh? Not jam meh? Why not buy in that X area, it’s more popular.”

On a longer term, compelling the banks to lend when they know it may increase their non-performing loans is not such a wise idea too. Just look at those ‘too big to fail’ banks in the advanced nations. These banks would actually be the reason for the next crisis which some say it’s not too far away. Here’s one prediction about what will happen when we spend too much. Please read: Unsustainable spending will bring next financial crisis  By the way, we can only spend too much when the banks keep lending. If we only spend what we have / earn, it will not affect the banks lah. Do you know how much do Malaysians owe the bank? This was a slightly earlier report. Household debt vs GDP is now 88.4%, down from 89.1% Besides, two-generation loans would also mean that people may think about stretching their affordable limit even more. Look at the buyers today, most of them want to buy something perfect instead of buying first and upgrade later. THe same applies for car ownership too. Once people believe they have extra money from lower repayments due to much longer repayment period, car sales would go up. I think we know… car is not an asset. My conclusion? Let’s just keep it to our generation when it comes to housing loans. Happy applying.

written on 14 June 2017

Next suggested article: Buying a 600k condo, having a 300k cash?

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