Experts hold different opinions regarding the federal government’s plan to launch a property crowdfunding scheme known as FundMyHome.com by early-2019, reported the Sun Daily.
For instance, Khazanah Research Institute (KRI) Research Director Dr Suraya Ismail is urging Putrajaya to relook the peer-to-peer lending platform, as it will likely increase home prices.
“It’s an investment scheme. There’s nothing to suggest that it’s a home ownership scheme because the buyer doesn’t get the sale and purchase agreement,” she told the media at REHDA’s Budget Commentary 2019 on Tuesday (13 Nov).
“It’s not something that will increase home ownership. It will only increase home prices because what investors want is for prices to appreciate,” Suraya noted, adding that the buyer would have to co-own the house with investors.
Asian Strategy & Leadership Institute’s Centre for Public Policy Studies senior policy analyst Jarren Tam told the Sun Daily that while the initiative has good objectives, it could exacerbate household debt in Malaysia by making access to credit more lenient.
“This will only lead to the worsening of household debt, which is already proportionately comprised of primarily mortgage payments. Hence it is not a particularly good policy for home buyers as it does not address the real problem of the property sector, which is the widening gap between income and house prices. A more holistic approach would be raising household income levels and reducing inflated house prices.”
National House Buyers Association Secretary-General Datuk Chang Kim Loong thinks that the property crowdfunding scheme will not address the root cause of Malaysia’s housing woes.
“The crux of the problem is ‘affordability’ and not ‘lack of financing’ as there is adequate liquidity in the banking sector.”
“It could also encourage property scams. Who is going to ensure the peer who invested will obtain returns? Who will enforce the lending arrangements? What happens in the event of default? Is the Securities Commission (SC) going to undertake additional duties? This is a legalisation of money lending without the need for a licence.”
Similarly, Knight Frank Malaysia managing director Sarkunan Subramaniam believes that the scheme will help first-time home buyers who are struggling to get bank loans, but lenient lending policies could lead to a mortgage crisis similar to what was seen in the US.
As such, Sarkunan wants the SC to make sure that fund managers participating in the scheme will thoroughly check the credit profiles of the people applying for the property crowdfunding scheme.
“There is a need to prevent fund managers who may be tempted to quickly build a portfolio by lending to borrowers with compromised credibility. Subsequently, the funds’ portfolios should be reviewed regularly to ensure that investors’ investments are secure.”
Furthermore, REHDA Institute Chairman Datuk Jeffrey Ng thinks that participants in the scheme could encounter issues in obtaining the needed 20 percent downpayment.
“As it is today, a 10 percent downpayment is already a huge hindrance to home purchase for most first-time buyers.”
He also pointed out that applicants in the programme will have to either sell, top up the 20 percent value based on the home’s market value or refinance to fund the other 80 percent at the end of five years.
“Home owners may lose their down payment in the event of a market downturn but will not gain if capital appreciation is not more than 20 percent over the next five years,” Ng explained.
Nonetheless, investors will obtain 100 percent of first 20 percent increase in value and will not suffer losses if home prices fall by 20 percent, Ng added.
Image source: Reuters
This article was edited by the editorial team of PropertyGuru. To contact them about this or other stories email editorialteam@propertyguru.com.my
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