Tuesday, September 7, 2010

Banking And Housing Part III

I was going to write about this (again), as there has been quite a bit of talk regarding limiting loan to value ratios (here and here for instance), but Salvatore_Dali has a good write-up on it already, with up-to-date data on price movements:

Malaysian Property Bubble?

If you say Malaysian property bubble, it does not look so plausible ... but if you replace it with KL or Penang property bubble, you have more nodding heads - with possibly the property sales and developers disagreeing…

…Almost every single valuation matrix would put property prices in KL and Penang in the overvalued category…

…Foreign buyers are mostly leaving finished units and houses empty. Don't believe me, go check out houses and apartments costing more than RM2m and RM1m respectively. If you can get 50% occupancy, call me and tell me where!!!

Read the rest for his analysis.

I’ll only reiterate what I noted in my last post on this issue: sales have only been strong in the RM250k and above segment, and particularly for units priced RM500k and above. If the article Dali is quoting is correct, than most of this seeming demand is coming from insiders hoping to make a killing if prices continue to rise.

Dali is also right in saying that interest rates are too blunt an instrument for capping housing price increases – raising minimum down-payments is a better weapon in this fight. Nor do I think the banking system itself is at risk, judging by the falling loan approval ratios, so BNM intervention should be as precise a possible.

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