Having analysed the initial proposal on housing loan made by Urban Wellbeing, Housing, and Local Government Minister, Noh Omar, as well as the reaction of experts and the general public, KEADILAN Youth would like to state our objection to the proposal, due to the high risks involved especially for the younger generation.
The minister’s proposal, which aims to allow developers to provide loan to house buyers which with an interest of up to 18%, is a short sighted approach towards solving the issue of home ownership.
The current control measures set by Bank Negara will surely be bypassed as developers are not regulated by BNM.
As such, this will encourage those who are unable to get bank loans due to their weak financial standing to purchase property beyond their means, and eventually give rise to greater risk of loan defaults.
With Malaysia already burdened by rising household debt that currently stands at 89% of GDP, this proposal has the makings of a sub-prime crisis which had hit the US economy hard in the last decade and was also a critical factor that led their country to recession back in 2007-2009.
The crisis occured precisely because banks were handing out loans freely even to those with weak financial scores and in the end many of these purchasers defaulted on their loan and left a massive black hole on the property market.
The young especially stands to lose the most as any property purchase with such high interest will not only be a burden to their bank accounts, but it will also lessen their already weak spending power. This scenario will be insurmountable for the young as they are already burdened by rising prices of goods and services, PTPTN and other study loans, ever rising car prices and transports fees, etc.
This move will also not guarantee that house prices will be reduced in the short term. In fact developers will have a free hand at increasing house prices due to the fact that many house buyers are now able to meet their requirements for loan.
Any resulting crisis will have a massive impact on the economy, and the young which are already seeing record number of bankrupts the past several years, will likely see a bleaker future.
The government should instead focus on working with the developers to reduce house prices, and let Bank Negara by itself regulate loans. There should also be other mechanisms to ensure that the younger generation has a place to live in comfortably for example with greater rent control which has so far been an area left untouched.
The government should realise that their role is not to encourage home ownership, but to facilitate a better living condition for the people and empower them by incentivizing the economy.