When analysing Non-Performing-Loan (NPL) numbers, it looks like there are very few defaulters, in terms of percentages.
Does this mean that banks have been too strict since only the very qualified get their loan applications approved? Should banks lower their lending criteria?
In the US for example, the Mortgage Crisis occurred within a short period when people began losing confidence in the property market as soon as the number of defaulters started to rise.
In Malaysia, negative sentiment prevails currently. In fact, this slowdown in transactions began in 2013. So, what can banks do to help reduce the number of current unsold property stocks?
In an article in edgeprop.my, the Penang Real Estate and Housing Developers Association’s (Rehda) past president Datuk Jerry Chan said that banks should reveal the statistics of defaulters to “justify” their “strict” rules on housing loans.
He said, “Banks have become a lot stricter on giving housing loans over the years but we found people have been continuously servicing their loans as they want to keep their houses.”
Chan added, “We know that the number of loan defaults has not gone up over the years. As such, banks should be more receptive to the efforts of the developers and the government to help people own homes. Banks should make it easier to obtain loans.”
He was of the opinion that perhaps banks should look beyond the payslips or income tax of purchasers because some people were working “second jobs” these days.
Kopi and Property thinks it is important for banks to also reveal the statistics for successful applications and perhaps their Debt Service Ratio (DSR). Also their salary range as well as the median property prices which these successful applicants are buying.
The data will be interesting and this can go a long way in also educating first-time home buyers about their monthly expenditure as well as expectations.
There are many who are really over-stretching themselves just to get a property considered more “prime” than their peers.
Truth is, one solution is also for potential buyers to go for cheaper properties in order to enjoy a higher chance of getting their loan applications approved.
This article first appeared in kopiandproperty.com
Charles Tan blogs at property investment site kopiandproperty. He dislikes property speculators and disagrees that renting is better than buying. He thinks it’s either property or poverty. He is presently the CEO of an auction house auctioning assets beyond just properties.