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Focus on the property price, not the financing options.

Posted in Buying Condos, and Property, KL / Selangor

This was the earlier article about the peer-to-peer (P2P) home financing which was announced by our Finance Minister Lim Guan Eng just days ago:  risk worth taking to own a home. This is HBA’s point of view.  Article in MalayMail.com  In a statement, HBA said it “respectfully disagrees” with the initiative, pointing out that the real problem is the high price of houses, and not financing options. It added, “Malaysia is facing a housing crisis where the price of properties is too expensive in comparison to their incomes. The crux of the problem is ‘affordability’ and not ‘lack of financing’ as there is adequate liquidity in the banking sector.”

It also shared its concerns about growing property speculation, property scams and bad debts, as the government will be providing a buyer with a poor credit record access to “easy credits” with the P2P scheme. HBA equated the scheme with a “legalised money lending” system. It added, “Who is going to ensure the peer who invested will obtain a return? Who will enforce the lending arrangements? What happens in the event of default? Is the Securities Commission going to undertake additional duties? This is a legalisation of money lending without the need for a licence.”

Besides the P2P financing, the HBA has also stated its disagreement with the new 5 per cent rate for Real Property Gains Tax (RPGT) for properties that are disposed after the sixth year. HBA added that it had in past lobbied the government to not change the RPGT rate for the first two properties, and to only increase the rate for the third property onwards. The reason is because most people can afford to buy two properties. One for own home and another for investment. It added, “By charging a RPGT rate for people who have held properties for six years or more, the PH government is effectively imposing tax on inflation, and this will be punishing genuine long-term investors.”

I personally think the government any more NGOs to educate the potential buyers that they do not need to push their affordability to the edge. If one is able to afford up to a RM500,000 property, there is really nothing wrong to buy a RM400,000 property instead. Two advantages for this move. Buyer gets to save more money instead of tying it all up into one property. A RM100,000 difference is RM500 savings per month. Over 5 years, this will become RM30,000.  Enough downpayment for an affordable home. Secondly, buyer would be adopting a more prudent home-buying move. On a longer term, say 5 years down the road, the owner would have saved enough for another property which could either be an upgrade or an investment property. Our former BNM governor said something similar a few years ago too. Article here. Happy understanding.

written on 4 Nov 2018

Next suggested article:  40% of debts owned by the top 20% income households

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