thestar.my/News/Nation/2014/11/23/Najib-PR1MA-loan/ The issue in not solved by easy credit. The reason why this is happening is simple. 1. House prices have soared creating an artificial bubble. Developers are announcing 100% sold units, but in actuality most of the units havent changed hands yet. Just wayang kulit only. The reason behind this is simple, they need to show to the financiers that they have sold the units, so that they will get financing for the next phase / projects, and once that is done, they will be able to increase the price of the units in the new phase, which would automatically increase the price of earlier ones (which at this point would sucker the actual buyers in, because they think that if a developer has build a second phase, the area must be great for investment, to live in, etc) 2. People are already feeling the strain. Interestingly, the rental prices hasnt really increased as fast as the property prices, because there is no incentive for the developers to do so, and that is a clearer picture on the property market. We have an abundance of residential and commercial properties available for purchase / rent (in spite of what is being said by the Minister of Housing in the Sun on Friday). 3. Providing easy credit for people to purchase inflated assets is further enhancing the size of the property bubble. Financial institutions arent going to be responsible in checking whether a person has already over stretched their financial situations. Reasoning is simple, PROFITS. If not, why are the issuing credit cards to people who cant afford it (including new graduates?).... This in turn will increase the debt-service-ratio to figures that cant be managed and increase the number of new bankrupts within the country. So, what can be done. 1. Govt contrary to popular belief can CONTROL the prices of the development. They are the ones approving the prices of property in new development. The approved prices of the new development is the one that is causing the rises in the property in the completed developments. 2. Govt can also control the number of new devt approved. There are a lot of empty residential units, commercial units, etc. Until it reaches a figure below a certain threshold in that area, no new devt should not be approved. Fat chance of this happening because greed will also trump common sense. 3. I would try to convince developers, but to them the most important thing is profits. 4. Same thing with investors. As long as there is a possibility of making profit, they will continue to purchase with the intent to hold, rent, sell to make extra buck, while limiting the access to the people who actually really need it. Thats all for now. Have fun reading.
Posted on: Sun, 23 Nov 2014 10:17:49 +0000
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