One covered car park.

Rental RM2100

After months of anxious waiting, Wang Jinxia finally obtained a coveted spot in Shanghai’s trial affordable-housing programme, but now the former factory worker is scrambling to pay for it.

The 53-year-old divorcee, who took early retirement years ago, is desperate to move after living eight years in a 60-square-metre (650-square-foot) Shanghai apartment with her octogenarian parents and two other relatives.

“I’ve been stressed out recently. I have many new grey hairs. I will have to pour all of my 70,000 yuan (10,300 dollars) savings into this,” Wang said outside a makeshift centre for mortgage applications at a local school.

She is among the first batch of about 1,940 families selected to buy low-cost housing that is selling for about a third of market prices, as part of a new affordable housing campaign in the city of more than 20 million.

However, Wang and others are finding even “affordable” housing out of reach due to limited financing options for low-income buyers — a hurdle for government efforts to quell public concern over skyrocketing prices.

China’s public housing programmes have been neglected for years as local governments sought to cash in on spiralling property prices with more upmarket developments.But a growing outcry over the past year has put affordable housing back on Beijing’s agenda.

The stakes in China’s housing programme are high not only for low-income people such as Wang, who have been left behind by China’s explosive growth, but for the economy itself.

It grew 10.3 percent in the second quarter of this year — slowing from a blistering 11.9 percent in the first quarter — as Beijing took steps to cool soaring property prices.”The social housing programme is on track and will constitute an important cushion for any potential slowdown in private, market-based residential property construction,” Morgan Stanley economist Qing Wang wrote in a note.

Beijing’s ambitious target to build 5.8 million affordable housing units this year is aimed at preventing a hard landing for property investment growth and propping up demand for basic materials such as cement and steel, Wang said.

If it succeeds, the programme could boost China’s economic growth by up to a percentage point or more, according to Bai Hongwei, a property analyst at China International Capital Corp.

Only limited and fuzzy official data have been available, however, and the push has been blemished by reports of insufficient land and high-income earners exploiting loopholes to take social housing spots.

Analysts estimate only 40 percent of the housing local governments pledged to build last year materialised, as they continued selling land to developers at market rates, and that amount might rise to 50 percent this year, at best.

In May, Beijing told local officials that affordable housing would be part of their performance appraisals.To qualify for Shanghai’s trial project, the family’s average annual income per capita must be less than 27,600 yuan, while each member’s share of floor space in their current residence must be under 15 square metres.

Some participants have likened the process to winning a lottery.To discourage fraud and corruption, the names and addresses of those selected are published online.Yet once chosen, participants must still find a way to pay for the home.

“No bank wants to do this. It’s not a profitable business,” said a mortgage officer at the makeshift mortgage outlet set up by state-controlled China Construction Bank, who gave only his surname, Tang.

“We are here because the government instructed us,” he said, punching a calculator to work out monthly repayments, the biggest concern for low-income families.For Wang, a mortgage for the newly built 70-square-metre home on the outskirts of the city to which she has won rights would cost 2,200 yuan a month.

That’s 43 percent of her and her parents’ combined pension, payable over 16 years, the longest period the bank offers.

“For me, a mortgage is out of the question. I just can’t afford the interest payments,” she said.Despite winning a place, the keys are still out of reach for the retired factory worker.

She persuaded the developer to give her three months to come up with cash to buy the apartment as she asks friends to lend her money.

But success is still far from certain, she said.

THE subject of property prices and financing has gathered momentum ever since news broke that Bank Negara is assessing the situation to determine if new measures should be instituted to cool down fast escalating property prices.

Lobby groups for the industry have been busy making their case heard, saying that any move to impose higher downpayments for houses would hurt the property market.

Their concerns come at a time as a growing number of people have complained that prices of houses, especially in the hotspots in the country such as the Klang Valley and Penang, are spiralling beyond affordability.

The last thing everybody needs is such speculation spreading to other areas where for the moment, speculative activity appears to be contained for the moment in the hotspots as 94% of houses sold in the country are priced below half a million ringgit and 85% of houses launched in the past nine months cost below RM500,000.

Dealing with speculation is tough and the last thing anyone should do is to make genuine buyers suffer, especially first time buyers.

Suggestions that houses costing below RM500,000 should not be subject to the new higher downpayment requirement makes sense.

Also first-time house buyers or owner occupied houses should be given the most ease of financing to allow them to fulfil the dream of owning a home.

It’s also hard to clamp down on speculative activity as the wealth creation process is an allure that developers, banks and policy makers might find hard to turn away.

After all, the money generated from flipping houses adds to the bottomlines of companies and the money in the hands of people could well filter down to other consumption activity that would go a long way to help spur economic activity.

But the profit from speculating activity, this time driven largely by cheap and ready financing, is unsustainable and history is full of examples of the dire consequences of a property bubble gone burst.

It’s then not surprising that the authorities in other countries in the region, where a property bubble has formed, are working hard to manage and diffuse the situation. Rules introduced in China, Hong Kong and Singapore are far more drastic that what the authorities here are reported to be contemplating.

In fact the new rules that are talked about are tame compared with what has been done in the past. In 1995, reports said that Bank Negara imposed a maximum 60% loan for residential properties priced above RM150,000 to put the brakes on the then fast rising house prices.

Furthermore, a real property gains tax of 30% was imposed on foreigners selling their properties irrespective of the holding period of the property.

Those measures were met with a huge hue and cry from the lobby groups, and developers who claimed that such draconian measures would maim the market. A couple of years later Malaysia entered its worst-ever recession, and as they say the rest is history.

The point is, just as the saying goes, those that fail to learn from history are doomed to repeat it, and for Malaysia, failing to deal with any property speculative bubble would spell trouble for the banks that have grown to rely more and more on households to drive their lending activity.

In the interest of financial stability and common sense, the move to act should be made soon.

BEHIND THE NEWS
By ANGIE NG
www.thestar.com.my

PROPERTY, especially the hot housing market, has become a favourite topic these days. Malaysians are generally quite savvy investors and their penchant for viable investment instruments have contributed to the current run-up in the housing market.

The availability of easy housing facilities, including the 5:95 and 10:90 packages, is also fuelling the strong buying interest.

According to the National Property Information Centre in its latest property market report, average house prices have risen 19% to RM273,000 in the first half of this year, from RM220,000 in the same period last year.

In Kuala Lumpur, prices rose about 35% to more than RM700,000 in the first half of the year, up from RM523,000 last year.

The strong jump in house prices in the past six months in some parts of the Klang Valley and Penang have raised concerns that unchecked speculative buying may cause overheating and result in a property bubble.

Bank Negara is keeping a close watch on the market and is engaging with banks on possible measures to curb excessive speculation on properties. It may consider imposing a 80% loan-to-value ratio (LVR) cap for mortgages to avert the risk of a potential property bubble.

The news have caused concern among industry and consumer groups over its dampening effect on affordability level and buying sentiment.

They worry that if the loan limit is brought down to 80%, many first-time house buyers, including those who have just joined the work force and the lower income group, may not be able to fork out the 20% downpayment for a house.

Their contention is that the proposed mortgage loan limit should not be imposed across the board and should give due consideration and flexibility to first-time buyers and those buying lower priced units priced below RM500,000.

Bank sources said Bank Negara’s aim of imposing the 80% mortgage loan cap was to reign in on speculative buying by certain quarters and the measure would be targeted at the high-end and non-owner occupied houses.

A blanket LVR cap will unlikely be imposed given the differing level of speculation in the various housing segments.

Given that houses of less than RM500,000 still constitute the bulk of transactions, accounting for 94% of the total number of units sold and 68% of sales value last year, the mass housing market may be spared. First-time house buyers may also be exempted from the proposed measure.

Should the proposed LVR cap materialise, houses priced from RM500,000 may be affected the most.

The mortgage loans market is now quite liberalised as the central bank does not impose any standard policy on mortgage loans but leaves it to the banks to manage.

Most banks have traditionally provided loans of up to 90% of the value of the property until about two years ago when market sentiment was impacted by the global financial crisis.

To stem the weak property sales, developers and their panel of bankers came out with different variants of housing loan packages that allow buyers to sign up for a house with just a 5% downpayment of the property value. Some even go as far as doing away with any downpayment and eligible buyers are granted the maximum 100% loan.

Although it has been almost two years since the introduction of these easy financing facilities to raise the affordability level for house buyers, these packages are still around in various forms today.

In fact, banks are still flushed with liquidity and are competing to get a bigger slice of the mortgage loan market. The stiff competition among banks has resulted in a mortgage price war with lending rates dropping to as low as base lending rate minus 2.3%.

But things have changed substantially in the past six months or so, and it should be time to review these housing packages.

If house buyers are made to pay higher downpayments for their purchases, the risk of their loans turning bad will be lower compared with if they have paid lower or zero downpayments.

We must not forget that the massive sub-prime housing debts in the United States that turned bad had triggered the global financial crisis two years ago and the world is still paying a heavy price for it today.

Although the LVR cap could dampen property market, demand for quality products in prime locations is expected to remain strong although buyers will be more selective.

Ultimately, if the proposed mortgage cap succeeds in cooling off the rapid rise in prices, especially for landed upper medium to high end residences, it should ensure a more sustainable and resilient property market.

By ONG HAN SEAN
hansean@thestar.com.my

PETALING JAYA: Several groups are up in arms over a proposal to cut housing loans by 10% from the current cap of 90%, saying that the move will only discourage Malaysians from buying houses.

National House Buyer’s Association (HBA) and Federation of Malaysian Consumers Associations (Fomca) cautioned that the proposed home loan reduction to 80% would only be a burden to potential house buyers.

HBA honorary secretary-general Chang Kim Loong said the proposal would go against the Government’s plans to encourage home ownership.

“Young professionals who are just starting out will be deprived of buying a home for themselves. How are they going to get the 20% upfront payment?

“That does not include the legal fees and stamp duties house buyers have to pay,” said Chang when contacted yesterday.

He said the move would only be good if it targeted high-end buyers, as an effort to deter speculation.

On Sept 2, StarBiz reported that Bank Negara was engaging with banks on possible measures to curb excessive speculation on property prices.

One of the measures discussed was whether the central bank will be capping the loan-to-value ratio (LVR) for mortgages at 80% in order to avert the risk of a potential property bubble.

Currently, most banks provide loans of up to 90% of the value of the property.

Fomca secretary-general Muhd Sha’ani Abdullah urged the Govern­ment to ensure there was enough affordable housing available first before implementing such proposals.

“40% of the workforce earn up to RM1,500 a month. If this proposal were to be implemented across the board, how are they going to afford houses?” he asked.

Gerakan vice-president Datuk Mah Siew Keong said that if the proposal was applied across the board, the property market, construction industry, housing and real estate industry, and economic growth would slow down.

“Bank Negara must study the plan carefully, as the present limit of home loans of 90% has helped the housing and real estate industry,” said Mah, who is also the party’s economic development bureau chairman in a statement.

Housing and Local Government Minister Datuk Chor Chee Heung, however, said the measure would not dampen the housing market as in the long-term, it would actually be a healthy growth for the industry.

Banking sources said Bank Negara might consider discontinuing the 5:95 and 10:90 housing loan packages and impose higher downpayment for property purchasers.

This was due to a surge of between 10% and 30% in the price of landed properties in some parts of the Klang Valley and Penang

By TEE LIN SAY
linsay@thestar.com.my

Luxury units with spectacular views and top quality designs

TWO things stand out among the Top 10 freehold condominiums around KLCC – the wide disparity in capital values of those who made it to the ranks (the top 2 are worth more than two to three times than the tenth ranked) while it drives home the point that branding and specific site, even if in the same vicinity, can make a huge difference.

In June, when it was reported that a tycoon listed on Forbes had purchased a penthouse on The Binjai On The Park for RM38mil, many were agog at the price these new luxury condominiums were fetching.

Hashim Wahir … “There are many condos around KLCC. But there is only one KLCC condo, which is the Binjai on the Park
In fact, this particular transaction set the record for the highest single residential property ever transacted in Malaysia.

Even on a per square feet (psf) basis, The Binjai on the Park, developed by KLCC Holdings, has broken the record; one of its standard units on the auspicious 38th floor was sold for RM2,900 psf or RM10.6mil.

A strong indicator that living in KLCC has become more attractive, says Property consultancy Knight Frank managing director Eric Ooi, is that more tycoons are acquiring penthouses in condominiums in the vicinity.

Over the past five years, the demand for condominiums in the KLCC area has been geared towards lifestyle condominiums.

The earlier condominiums emphasized on space, bigger and better facilities. Good examples are Selangor Dredging Bhd’s (SDB) Park Seven and E&O Bhd’s Dua Residency.

“We were the pioneers of lifestyle condominiums five years ago when the concept was still very new. Now the new opportunity could be in luxury-lifestyle products,” says E&O executive director Eric Chan.

In the last one year however, demand for luxury condominiums of a different kind have been on the rise. These units offer the most spectacular views, are designed by famous international architects and have top-quality designer finishes and fittings. Examples are The Binjai on the Park and Troika.

Generally, while prices for real estate are heading north, there seems to be a new pricing phenomenon taking place with certain condominiums around KLCC.

According to Bandar Raya Developments Bhd chief executive officer Datuk Jagan Sabapathy, one should not use the normal parameters of supply, demand, comparative valuation and yields to explain the pricing power of luxury real-estate products such as The Binjai On The Park and Troika.

“For these sort of luxury condominiums, there are only about 500 units. These units are catered more for the top five percent of society,” he explains.

Both The Binjai On The Park and Troika offer 24 hour concierge service, delivery services from the shopping malls and even the booking of flight and concert tickets among many others.

“We are working with Suria KLCC, Mandarin Oriental and Traders Hotel to continuously improve our residents’ experience of the KLCC lifestyle. For example, residents gets priority treatment from Petronas’s newly operational Prince Court Medical Centre, which is just 5 minutes away, for any healthcare services.” says KLCC Group of Companies Group chief executive officer Hashim Wahir, adding that it is in a class of its own.

WestMont S.A. Properties senior negotiator Chris Teng says that the price of a condominium in KL depends on address, location and quality of facilities.

“The closer you are to the KLCC development, the value goes higher. The reason why The Binjai on the Park commands a premium is because it has a permanently unblocked view of the Petronas Twin Towers.

“We know for sure there will be no developments in front of The Binjai on the Park. A lot of the other condominiums have potential developments that could block their view, so this affects their pricing levels,” he elaborates.

Zerin Properties chief executive officer Previndran Singhe points out that there is a residential enclave forming in the KLCC area.

“With the KLCC maturing over the years, the residential enclave seems to be establishing on Persiaran KLCC where The Binjai on the Park is located, across the KLCC Park and not too close to the commercial activities around the Petronas Twin Towers and Suria KLCC.

“Apart from having the best address ‘Persiaran KLCC’, this side is greener, less congested, quieter and has more commanding views. A residential cluster is a lot more effective in attracting more families, both locals and expats, to shift to KLCC,” he says.

As it stands now, the take up rates for The Binjai on the Park and Troika are 70% of 171 units and 85% of 229 units launched so far.

KGV-Lambert Smith Hampton Sdn Bhd director Anthony Chua says these days, condominiums are more owner occupied compared to the past.

As such, there is more emphasis on quality of finishings and unique features that set them apart from other condominium developments.

SDB managing director Teh Lip Kee says that Park 7’s success is due to its location and high emphasis on delivering services.

Park Seven has a occupancy rate of 95% and are mostly expatriates.“These are people who walk to work, whether in Shell, Tan & Tan Developments, the Twin Towers or KLCC,” she says.

Jagan says that while Troika does not have the locational advantage of The Binjai on the Park, it still has a great view of the Twin Towers and the Royal Selangor Golf Club. It is also near the KLCC Park.

“We knew we had to do something special. We had a great location and branding, but how do we create superior value?

“So we looked for a superior architect that was iconic and leading, hence we got the number one architect in the world, Norman Foster,”

“The positioning of Troika is in its enduring value. The Binjai on the Park may have the primest site, but our building has the Wow factor,” says Jagan.

Previndran says that nowadays, there is a change in lifestyle with “many locals who used to stay in bungalows in Damansara Heights, now they choose to stay in luxury condominiums because they want the security.”

Chester Properties Sdn Bhd senior negotiator Nathali Tan adds that luxury condominiums are today considered high-class bungalows in the sky because of their size and exclusive features.

“These condominiums are spacious with built-ups of almost 4,000sf excluding space for pools, tennis courts, gyms and have private lift lobbies, very tight security, concierge services and are well maintained,” she adds.

Petronas, via KLCC Holdings Sdn Bhd is the developer of the entire KLCC Development, that is today’s Malaysia’s global landmark.

The KLCC masterplan includes the Kuala Lumpur Convention Centre, Suria KLCC, Mandarin Oriental, Traders Hotel, ExxonMobil, The Binjai On The Park and of course the Petronas Twin Towers.

The 88 storey Twin Towers designed by renowned world architect Cesar Pelli, has been the iconic skyline landmark of Malaysia since 1997.

Interestingly, The Binjai on the Park, developed by KLCC Holdings, is the only residential property within the KLCC development masterplan.

The design of The Binjai on The Park was to give residence of the condominium the most commanding views possible of the iconic Petronas Twin Tower.

That is why, the condominium was strategically placed diagonally across the towers on a corner lot of the KLCC Park.

“There are many condominiums around KLCC. But there is only one KLCC condominium, which is The Binjai on the Park,” says KLCC Group of Companies Group chief executive officer Hashim Wahir.

He says most international top class condominiums can only offer either city skyline views such as the apartments in The Peak, Hong Kong, or be part of an iconic development such as Burj Khalifa in Dubai or Roppongi Hills Residence in Tokyo or those overlooking sizeable parks such as Hyde Park in London or Central Park in Manhattan.

“From that perspective, The Binjai On The Park is the only one in the world that offers all these three. It has the most commanding views of the Petronas Twin Towers and is located right on the KLCC Park.

“We have a city within a city,” he says.

Hashim says there are more developments being developed under the KLCC masterplan over the next seven years.

“Cesar Pelli, the designer of the Twin Towers will be back in Malaysia to design two more towers which will forever change the skyline of KL.

“Malaysia is going to have two more iconic towers reshaping the KLCC skyline,” he says.

The ringgit’s strength and generally lower property valuations in the UK are drawing more  Malaysian investors, both retail and institutional, to London and the latest to make the move is the Employees Provident Fund (EPF).

The pension fund has allocated a war chest of £1bil (RM4.88bil) to invest in properties in the UK and has appointed ING Real Estate Investment and Deutsche Bank’s property investment arm RREEF to manage the investment. They will each invest £500mil in European property markets, focusing on the UK. In a statement on Monday, the EPF said the investments would be for long term with expected annual yields of 6% to 7%.

Property consultants lauded the fund’s move as being prudent and far-sighted as the diversification of its property investment portfolio would ensure a more balanced portfolio and spread the risks to more developed markets outside Malaysia.

Henry Butcher Malaysia president Lim Eng Chong said London was a very active international real estate market where income asset class was a major sector of the financial market. “Since last year, there has been an influx of foreign funds from Russia, the Middle East and the Far East, including China, into London to take advantage of the positive environment,” Lim told StarBizWeek. “There’s much more depth and breadth in the UK market. Very often, its economy moves in different direction from Malaysia’s, thus affording a more balanced and resilient portfolio. Presently, the UK is only (barely) coming out of a recession and, although the market has started to move, there is still some way to go.”

 London is also the financial capital of Europe and it is the de-facto choice capital in the EU for foreign companies. “It is a very opportune time to invest in the UK property market now. The ringgit is at record high against the pound sterling while the historic low interest rates in the UK (interbank rate is only 0.5%) make yields attractive,” Lim pointed out.

 He said commercial properties with strong convenants for at least seven years offered potential for upsides upon market recovery and there were deals which were bankable to capitalise on the low interest rates now.

Malaysia Property Inc chief executive officer Kumar Tharmalingam, who was in London when contacted, said the EPF was a well-regarded pension fund internationally with a reputation for prudent investments. “London is no more a rock-bottom country but you have to have a permanent presence here to take advantage of investment opportunities. Using the old-boy network in the city of London that the EPF is doing is the right strategy. It has appointed probably the best property advisers and managers in Europe and I believe they will guide the fund to the right quality investments,” he said in an e-mail response.

Kumar said as the EPF had to guarantee a dividend on all contributions, “it will be looking to buy completed assets which have been tenanted and have a structured and forecast return that is tangible.” He said at the height of the downturn in early 2009, yields of London assets went up as high as 8% but they had since gone back to their normal base of 5%. “But with the pound sterling and the euro at historical lows since the mid-90s, this may be a good time to buy well-positioned assets where there is an opportunity for rent values and currency appreciation in the medium term,” Kumar said.

It has attracted many institutional funds, including South Korea’s National Pension Fund which purchased a building in Canary Wharf and also took a stake in Gatwick Airport in February.

Kumar, who made a quick check with some of the major property agents in London, said he was told an Asian sovereign fund had made bids for a business park near Heathrow Airport.

Ireka Development Management Sdn Bhd chief executive officer Lai Voon Hon, who was also responding from London, said with Europe heading towards a double-dip recession, a number of prime commercial properties with blue-chip tenants in the UK would be available to investors at very attractive yields. “The advantage of UK commercial properties is that the lease is normally very long term so the income is fairly stable. As such, commercial properties with blue-chip tenants at high rental yields will be ideal for the EPF. The strong ringgit vis-a-vis the pound sterling is certainly to the EPF’s advantage,” he added.

According to CB Richard Ellis executive director Paul Khong, with the strengthening of the ringgit, investors are now able to buy more with the same ringgit compared with a year ago. “The top favourite destinations for both institutional and individual investors are still the UK, Australia and Singapore markets,” he said.

| Sept 3, 2010 KUALA LUMPUR:

Preemptive measures to curb purchases in certain property segments may yield temporary results as buoyant consumer sentiment and demand for good locations are expected to sustain.

Property analysts said there could be a short-term knee-jerk reaction to Bank Negara’s possible imposition of an 80% loan-to-value ratio (LVR) for mortgages to avert the risk of a potential property bubble.

CIMB research head Terence Wong is not overly concerned over such moves, pointing out that the previous imposition of a 5% real property gains tax last October had only resulted in a short-term cooling of demand. “This will be effective in cooling down the market for a few months. People will step back and pay more attention to the launches and product offerings instead of simply jumping onto the bandwagon,” he said. Wong, however, feels that the measure should not be imposed across the board. It should be applied to landed homes rather than condominiums, as it is mainly the prices of landed properties that have gone up extremely fast.

On the other hand, price increases for high-rise condominiums and apartments have been relatively subdued due to an oversupply situation. “We know there is a finite supply of land in the Klang Valley. Everybody wants his own plot of garden. So logically, that is why prices of landed properties are going up. In that sense, this potential move (to curb certain property loans) is not a serious concern,” said Wong.

Analysts are not surprised by the possibility of a cap on the LVR as the prices of selected properties in prime locations in the Klang Valley have shot up in recent months due to a combination of factors including pent-up demand and speculation.

Bank Negara is currently exploring this measure to reduce excessive speculation and prevent the housing market from overheating as the economy recovers amidst a low interest rate environment.

Developers have enjoyed record sales this year and in some instances, sales have been so strong that some developers have the luxury of slowing down their launches.

NewAsia Capital associate director Sherilyn Foong agreed that the possible measures would, to an extent, cool down speculation in the property sector. In Foong’s view, these potential measures could affect the take-up rates, especially among the higher value primary transactions which have benefited from innovative financing schemes. “Pending more details, if the cap is only imposed on higher value transactions of say, RM1mil and above, the lower-middle range should, technically, not be affected. “This is unless the entire sector turns bearish against the sentiment induced by sector-specific measures such as impositions of capital gains tax,” she said.

Credit Suisse research head Tan Ting Min, in her report on Tuesday, said capping the LVR at 80% would put a dent on the Malaysia property sector and dampen sentiment in the near term. “The cap on LVR will indirectly reduce affordability and may cool demand in the mass market and mid- to high-end segments. “We may also see some downtrading as affordability will be determined by the higher 20% equity upfront requirement.” In the longer term, Tan views the preemptive role taken by Bank Negara as positive. “It is critical in ensuring the sustainability of the Malaysia property market and reducing the risk of a major ‘shock’ to the sector should the economy slow or interest rates rise,” she said.

In the region, similar moves have been made to cool the property market over the past 12 months. Singapore announced another round of cooling measures on Monday, including lowering the LVR to 70% for buyers with one or more outstanding loans, from 80% previously.

Datuk Michael Yam … ‘Bank Negara should not impose a mandatory LVR cap on loans.

PETALING JAYA: Bank Negara is engaging with banks on possible measures to curb excessive speculation on property prices while developers caution that it should not be imposed across the board to avoid dampening the property market.

Responding to queries on whether the central bank will be imposing a 80% loan-to-value ratio (LVR) for mortgages to avert the risk of a potential property bubble, the central bank said: “Bank Negara regularly engages with industry players as part of its surveillance and supervisory activity. The engagements cover a broad range of issues and areas that relate to developments on the ground, safety and soundness of the institutions and the overall system.”

It added that to ensure prudent management of credit risk in the banks’ balance sheets, the central bank regularly engages with the industry on developments in the underwriting and selling practices of financial institutions.

The share of housing loans to total loans is about 26%, according to the central bank. When contacted, banking industry players said it was likely that any measures to be introduced would be pre-emptive measures to target certain quarters of purchasers and would not be across the board.

The measures are believed to be targeted at the high-end and non-owner occupied house purchasers.

Currently Bank Negara does not impose any standard policy on mortgage loans but leave it to the banks to manage.

But following a rise of between 10% and 30% in the prices of landed houses in some parts of the Klang Valley (including Kuala Lumpur) and Penang in the past one year, banking sources said Bank Negara might be looking at discontinuing the 5:95 and 10:90 housing loan packages, and preferred banks to impose higher downpayment for property purchasers.

The bank sources concurred that over the longer term, there must be the flexibility to allow more relaxed loan quantum if the market needs it, especially if there is a recession.

OCBC Bank (Malaysia) Bhd head of secured lending Thoo Mee Ling said part of the rationale for the 80% LVR for mortgages could be to curb speculative property prices in the market currently.

“If it is implemented, home buyers will have to self-finance a higher amount than they do now. In the short term, coupled with entry costs such as legal, stamp and valuation fees, the property market will take a dive and it will subsequently dampen the mortgage business.

“In the long term, the measure would curb speculative property buying and promote a healthier property market. Therefore, both the banks and property market will become more resilient to any potential crisis,” she said.

Datuk Michael Yam, the president of Real Estate and Housing Developers’ Association Malaysia (Rehda), said Bank Negara should not impose a mandatory LVR cap on mortgage loans at this juncture as it would dampen buying sentiment with spillover effects on other related industries such as construction and building materials suppliers.

“The local banking industry is well regulated and banks are very prudent and stringent in their credit assessment of borrowers. Banks have, on their own initiative, cut down loan margins to borrowers and only those who are credible and can afford to repay their loans will be offered a higher loan margin.

“Banks also are very selective of what projects they extend loans to.”Caution and prudence should be exercised when considering any measure for mortgage loans, said Yam, adding that it should not be across the board.

“It is better to leave it to market forces to decide as the banks’ stringent lending criteria is enough to ensure the quality of loans in the market,” he added.

Yam said that up to 90% of the country’s population are living in affordable houses priced below RM250,000, and the current low downpayment for property purchases has promoted home ownership among the lower to middle income group.

Mah Sing Group Bhd group managing director cum chief executive Tan Sri Leong Hoy Kum said a conducive financing environment was important to support the property industry, which was a significant engine of growth for the economy.

“We hope that any implementation of the 80% loan to value ratio will take into proper consideration the industry’s feedback and current market conditions.”

Leong said there was no property bubble at this juncture “as property price increases have not been across the board.”

“The properties which have been enjoying price appreciation are those with good concepts by branded developers, and sited in good locations.

“One must also take into account the construction cost, and also increasing price of good land in considering the prices of properties, which have gone up by 10% to 25% in the past 1½ years,” Leong added.

Key Asian economies fearing a US-style housing market bubble are taking fresh measures to curb runaway property prices as the region leads the global rebound from recession.

High domestic liquidity, cash-rich foreign investors and low interest rates have stoked demand, with prices for some sectors in Hong Kong and Singapore surpassing peaks seen in previous property booms.

China is also trying to rein in buyer exuberance by tightening credit and imposing other regulations that make it tougher to buy and sell property.

“On the whole, this is good news because this is a potential problem area and regulators are acting early on it,” said Deborah Schuler, senior vice president and group credit officer for financial institutions with Moody’s Investors Service, told AFP.

“These are people who believe you should not wait for bubbles.”The International Monetary Fund said in a report in June that booming Asian real estate markets “may pose risks to financial stability as banks are increasingly vulnerable to a price correction”.

“In addition, because the majority of mortgage loans in Asian economies carry floating rates, the widely anticipated rate hikes in the region may increase the burden on household balance sheets,” it added.

Singapore on Monday introduced new regulations to curb “flipping” — buying condominium units on easy credit and reselling them for a quick profit even before the property is built or opened for occupancy.

A typical three-bedroom suburban apartment of around 100 square metres (1,100 square feet) that will be ready for occupancy in only two or three years now costs at least a million US dollars in Singapore.In Hong Kong, a similar property can cost twice as much.

“We think that if we do nothing, there’s going to be a bubble,” Singapore’s Minister for National Development Mah Bow Tan said.

“And when the bubble bursts, not if but when it bursts, there will be severe implications for individuals as well as for the economy as a whole,” he said.

Singapore’s latest measures are aimed largely at buyers who have at least one outstanding mortgage.The minimum cash downpayment was raised from five to 10 percent of valuation, while the maximum amount a bank can lend was capped at 70 percent, down from 80 percent.

The balance can be taken from a buyer’s pension fund.”This round of tightening appears to be the most draconian,” said CIMB bank analyst Donald Chua.

In Hong Kong, the territory’s richest man Li Ka-shing snapped up in August two prime residential sites at prices well above market estimates.

On Tuesday, another developer paid 165 million US dollars for a plot of prime land in the teeming Kowloon district.Hong Kong announced in August it would further increase land supply and tighten mortgage lending on top of previous measures announced last year.

Home prices in the Chinese territory have surged nearly 45 percent from their trough at the end of 2008.Mainland China’s property prices rose at a slower pace in July, suggesting policy measures to cool the sector may be having an impact.

Beijing has tightened restrictions on advance sales of new developments, introduced curbs on loans for third home purchases and raised minimum downpayments for second homes.

The measures will help prevent “drastic fluctuations” in the market, Agricultural Bank of China chairman Xiang Junbo said Monday.

Asian economies have outperformed their Western counterparts in recovering from the global slump that started in late 2008.

“In Asia in general, there are strong capital inflows because of the strong recovery in Asia and the disparate performances between the Western and Asian economies,” said Ho Woei Chen, an analyst with Singapore’s United Overseas Bank.

Colin Tan, head of research and consultancy at Chesterton Suntec International in Singapore, said more cooling measures may be necessary.

“The liquidity problem is a global one. In Singapore, we are only starting to tackle this problem,” he wrote in local newspaper Today.

“Believe me, this is just the beginning.”