Cooling measures are timely but could be more targeted
TIMELY: Bank Negara’s initiatives are welcome but RPGT is a more targeted response at curbing speculationmove
The recent measures by Bank Negara are the current market buzz for almost everybody, especially buyers. I hear some agreeing with them while some others disapprove. As I have said before, it’s not easy to reconcile all stakeholders’ interests.
Anyway, what do you expect developers to say, especially those who are going to launch their projects? They are businessmen and procuring good sales is imperative to be deemed successful and maximising profits is one of their goals. So naturally they are disappointed.
Ask any mortgage sales officer, they are also disappointed because the moves will dampen their sales. On the contrary, first time buyers welcome the bank’s measures to rein in the high prices. Property owners are happy with high price appreciation. So you see, it’s not difficult to understand where they come from and their varied opinions.
Malaysia’s introduction of cooling measures is not the first in the region. Earlier, China restricted mortgage lending to curb runaway property prices. Singapore imposed higher stamp duties to check prices and recently Indonesia imposed higher downpayments like 30 per cent for a property purchase. Mindful of the 1997/98 financial crisis, I guess they are adopting pre-emptive measures, all of these are designed to prevent a financial crisis.
Frankly speaking, Bank Negara’s move is timely and correct and it should not be concerned whether the moves are popular or not. As a regulator, it has to safeguard the banking system and take preventive measures.
It has to “prevent a property bubble.” If I’m not mistaken, the Bank Negara measures are to curb speculation. My only concern is that the measures are more broad-based to cool property prices rather than target speculators specifically.
In order to understand why I say this, let me explain.
First, how do we define the word ‘speculator’? To me, people who buy and sell their properties for a profit within a year fall into this category. They have no intention to occupy their properties as a long-term investment.
(For those who dabble in the primary market, ‘speculators’ are those who sell within a year from the date they get the keys from the developers and not from the date they sign the S& P agreement.)
In fact, my peers argue that the definition should be broaded to two years instead of a one-year disposal period. Anyway, that’s another story.
Coming back to the first measure - 70 per cent loan to value cap for third property buying, I guess people are thinking there is a greater probability of speculation after acquiring two properties. They would be correct but there is also the probability that they bought for long-term investment.
As for the second measure - net income basis for calculation of loan, it affects all buyers, including first time buyers and speculators. So now you understand why I say RGPT (real property gains tax) is more targeted at speculators.
Well, I am sure there are people with suggestions contrary to my views and I would like to hear them. After all, discourse is all about exchanging ideas.
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