The Institute for Democracy and Economic Affairs (IDEAS) called on the government to focus on the issue of rising household debt that is mostly driven by housing loans, while also advising against further credit easing for first-time homebuyers.
The statement was a response to the call of the Minister of Finance, Lim Guan Eng, to ease the rules of mortgages as an assistance to first-time house purchasers, reported The Edge Markets.
Guan Eng believes that lots of potential homebuyers are finding it hard to secure loans, despite BNM and other banks taking steps to ease credit conditions for them.
“We should look at the issue from a broader perspective. With 76.3% home ownership rate, Malaysia is scoring pretty well worldwide; on the other hand, BNM has revealed that the household debt is 82.2% of the GDP,” said Carmelo Ferlito, Senior Fellow at IDEAS.
He emphasised that the government’s focus should be on resolving the latter figure, instead of the former, especially due to loans for the purchase of residential properties continuing to be the important factor of debt growth.
“A further easing of credit conditions will harm financial stability for those people which are already in a fragile situation,” Ferlito added.
“The situation faced by the property industry requires a market-oriented approach. Without government intervention and credit support, developers will have to deal with the consequences of their investment decisions and consumers will have to take financial choices consistent with their economic conditions to avoid overexposing themselves”.