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Affordable homes? Lower deposit, preferential packages and DIBS proposed

A home is a necessity. Owning one is compulsory, for everyone. Majority may not have enough within their EPF for their retirement but with a fully paid home when they retire, it will be huge plus point. This is why politics should be kept out and the genuine potential owners should be given as much assistance as possible. I generally support something similar to DIBS, as long as the authorities are able to track and enforce who could get it as well as potentially some limitations to the buyers who qualify. Seriously, if the person is thinking of buying to flip, this is not for him. Just stay out or go casino to gamble instead, it’s faster too. 
Reported in a local media, Penang State Housing Committee chairman Jagdeep Singh Deo has proposed a few things for Bank Negara Malaysia’s (BNM) considerations. His first proposal include lowering the deposit required for affordable housing units. I think this has its plus point because I learnt that for many of the buyers for the very affordable units face problems in securing a loan. A developer once told me that he had to sell his affordable high-rise units by two times on average because the loan rejection rate is very high! For a project of less than 200 units, he had to sell it over 500 times! However, on a more rational note, I would advise the buyers to really only focus on those they can afford.
Second proposal is for banks to come up with preferential packages with a longer loan repayment period and lower monthly premium be offered to those applying for these affordable homes. Longer repayment periods, I think the banks would welcome it. They can also set some requirements so that the buyers are tied to them longer. The only issue is that the buyer may then be tempted to go for a more expensive unit instead since the monthly payment is already lower. If they do this, everything falls back to square one. Perhaps we wait for some comments from the banks themselves.
Last suggestion but I think the most significant one is to ask BNM to reintroduce the Developers Interest Bearing Scheme (DIBS) for affordable housing projects. Frankly, I think even if DIBS were to be allowed again, it should this time be only for first-time home buyers. Objectively, if this is available to everyone, the greed to flip for quick profits will come back to haunt the property market. Seriously, this time it may crash because this time, the number of interested buyers have grown tremendously versus many years ago. Unless of course every one of these affordable unit buyers are also only for first-timer.
I think these proposals are also applicable for secondary markets too, als ong as they are within the specified price range. In fact, it may be safer for the banks to do this for the secondary market as the valuation is already stable and not as unpredictable. If we were to ask anyone in 2012 about 2016, I do not think anyone would have expected 2015 to be bad and the potential for 2016 to be worse. Thus, predictions are always debatable but value of the secondary property is much more certain. Happy waiting, especially for first-time home buyers. This may be your ticket to a new home in future.
written on 2 Apr 2016
Next suggested article:DIBS? Yes, it’s a comeback potential

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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  1. My view is that this policy relaxation should only be targeted to first time home buyer which this also carries moderate risk.
    What is being proposed is basically to encourage lender to gear up further to buy house! Malaysia is already having one of the most relaxed credit policy in the region to purchase a property as one can easily just pay 2-10% down-payment to buy a house via a 35-year loan (or DIBS)! I am not sure why are we encouraging further leverage for this less productive asset in the system given our household debt is one of the highest in the world!
    Please sit down and think a bit whether it is productive to ask one to borrow as much as possible at 5% interest rate, then to own a house that will only collect 2-3% or 4-5% NET RENTAL YIELD for landed and condo respectively (based on my personal guesstimate). The owner will have to suffer negative 1-3% loss every month most of the time!
    disclaimer: I am a property investor.

    1. WK, I share same view. ONLY for first-time buyer and there should also be some restrictions too. This is a benefit, nota key to gain profits.

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