support@kopiandproperty.com

Advertisement Banner

Not easy to allow developers to ‘lend money’

A close friend and I was talking about this issue just yesterday. My earlier article here:  No loan? No worry. I (developer) lend you. She is someone senior with an economics PHD from the banking fraternity. We agreed that the suggestion to allow developers to become money lenders is not a good one. Her point of view is simple. When one developer is approved, then other developers should also get approval. This will then be followed by ever more developers and the loans being ‘approved’ by these developers would be huge within a few years. Assuming we suffer another external economic shock and these developers have a hard time selling their properties and worse still, their buyers defaulted. May I know who will handle the mess? Really macro-economic view, yeah?
For me, my main worry would always be for the buyers. Assuming the bank would only approve 80 percent today, the buyers would need to either get the remaining amount somewhere or they would have to abort the purchase. However, if they can still get approval from the developers would they believe they can afford something more expensive? Would this then create more people with loans they couldn’t afford in the first place? Remember as a country we have this issue? Households Malaysia and Debts. It’s easy to get into debts but it’s very hard to get out. Let’s always be savvy about this. Bankruptcy and Properties
Of course there are also others who said that this may create a property bubble. I think this would be a remote idea because the loans that the developers can give out would be extremely small in comparison to the whole  industry. There are comments that property prices will be higher due to this, I also think this is developer specific. Without understanding objectively and buying rationally, those few hotspots would remain to be hotspots and prices would rise faster than the secondary ones. I think this would remain the major cause for property prices to keep increasing; demand vs limited supply. In conclusion, my friend and I are not supportive of the idea developers becoming money lenders. This is the same opinion, regardless of whether the rate is 6 percent or 18 percent.
written on 22 Sept 2016
Next suggested article:  Maximum loan tenure- 35 years enoughlah

Property Investment always start with knowledge. Equip ourselves with more here.

Motion arrow towards right
Share on facebook
Facebook
Share on twitter
Twitter
Share on linkedin
LinkedIn
Motion arrow towards right
Share on facebook
Share on twitter
Share on linkedin
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.

Advertisement Banner

Facebook Comment

0 Responses

  1. The proper roles of businesses must be accorded it’s proprietary responsibility. Banks for lending and deposits are under Central Banks. Development of buildings or properties is under Housing. Don’t mix and confuse ourselves.

Leave a Reply

Your email address will not be published. Required fields are marked *

Table of Contents

Most Recent Posts

join the family

Like us for daily investment news and more

Hit the like