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Property prices on rise in Malaysia Print E-mail
Property values in Malaysia have risen significantly over the last few years, especially in urban areas, and the trend is likely to continue.

Malaysia's Real Estate and Housing Developers Association ( REHDA) said in Kuala Lumpur that residential properties in Malaysia are expected to appreciate an average 13 percent in the first half of this year.

Michael Yam, REHDA president, told reporters on Thursday that property prices in various parts of Kuala Lumpur will remain extremely high due to expensive land cost.

Higher costs of construction materials and energy have also been cited as factors fueling the increase of property prices.

A number of initiatives implemented by the Malaysian government have shown that the authority is trying to tackle housing issues, particularly in ensuring the primary objective building residential properties, which is to provide accomodation, is met.

Among the initiatives include a scheme launched on Wednesday that allows young working citizens to buy their first home without paying the downpayment.

The scheme, labelled as "My First Home Scheme," would see the government, through national mortgage corporation Cagamas Bhd bearing the initial 10 percent deposit for the house.

Under the scheme, citizens earning less than 3,000 ringgit (989 U.S. dollars) a month could acquire up to 100 percent financing for their first home, which costs between 100,000 (32,965 U.S. dollars) and 220,000 ringgit (72,530 U.S. dollars).

Analysts said that the scheme, regardless of its effectiveness in helping the young to own a house, shows that the government is aware of the impacts of fast rising property prices.

In Nov. 2010, the government decided to impose the maximum loan- to-value ratio of 70 percent for the third house financing facility taken by a borrower.

This is to curb excessive investment and speculative activities in the real estate industry, said the government.

Apparently, despite the economic slow-down in the country, people are buying properties as a tool to "keep value", as the low interest rates of saving will have their money values eroded by the anticipated inflation.

Houses in Malaysia are cheap in the eyes of many foreigners, particularly those who are from densely populated countries like Singapore, Japan, South Korea, and the region of Hong Kong.

Some real estate developers said the high demand of houses by people from these places have also contributed to the rising of property prices in the country.

With the Asian economy recovering, and the promotion of the " Malaysia: My Second Home" program, which aims to woo foreigners to stay in Malaysia, property demand is expected to grow further.

In view of the trend, Yam urged the government to review the mortgage value limit for the scheme to 350,000 ringgit (115,226 U. S. dollars).

He said that prices of terrace houses in Kuala Lumpur were averaging about 430,000 ringgit (141,563 U.S. dollars) in the third quarter of last year.

"Developers also face cost pressures in terms of absorbing road building cost," he said.

Malaysia's household debt increased 8.4 percent from 516.6 billion ringgit (170 billion U.S. dollars) at the end of 2009 to 560.1 billion ringgit (184.39 billion U.S. dollars in August 2010, research shows.

The share of household loans to total bank loans on the other hand, rose from 35.2 percent in 2000 to 55.5 percent in August 2010.

However, for young adults who may have already been tied up in credit card debts, higher mortgage value limit for the scheme, according to analysts, may not be a good offer.

They believe lower limit helps avoid sub-prime mortgage crisis, like that experienced in the U.S. four years ago.

The U.S. sub-prime crisis in 2007, which led to foreclosures, collapsed in the mortgage industry and a slowdown in the U.S. economy was fueled by a widespread of easy home loans that followed by massive defaults during a property bubble burst.

They said a maximum mortgage value of 220,000 ringgit (72,530 U. S. dollars) sets parameters for loans.

Source: Xinhu


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