MALAYSIA- Malaysia's central bank has stepped in to lower the temperature of the real estate sector, restricting access to credit for those buying third or subsequent residential properties. However, authorities are playing down speculation over a bubble, describing the intervention as a measure to keep housing affordable. On November 3, Bank Negara Malaysia issued a statement announcing a new loan-to-value ratio (LVR) ceiling for persons seeking credit to buy a third home, with the maximum limit being set at a still substantial 70 per cent, according to the Oxford Business Group. In a statement released to coincide with the announcement of the new loan restrictions, Bank Negara governor Zeti Akhtar Aziz said the move was a preventive measure rather than a response to an existing overheated market. “While Malaysia is not experiencing a general property bubble, targeted preemptive measures are appropriate to moderate the increases in property prices that are evident in selected locations that are speculative in nature,” she said. Malaysia's property market has been booming, with the residential segment particularly active. August saw a 32 per cent increase in applications for home loans compared to the same month in 2009, while analysts predict that residential sales could be up by some 26 per cent for the whole year, with a combined value of $17 billion or more. With the central bank's interest rate still running at just 2.75 per cent, and banks prepared to lend up to 90 per cent of the value of a property to potential buyers, there has been a high level of liquidity in the market, matching demand but also inflating prices and potentially a bubble. The move to tighten credit for third properties came as no surprise, as it had been flagged by Prime Minister Najib Razak in September, amid media reports that Bank Negara had been holding talks with lenders about ways to curb real estate speculation. In September, Najib told reporters that the government and the central bank were considering placing a limit on financing for third purchases, though he said there was no intention to lower the lending ceiling for what the prime minister called “bona fide buyers”. Most analysts and market experts backed the move, with Datuk Michael Yam, the president of the Real Estate and Housing Developers Association, saying the central bank's action would result in a healthier and more orderly residential market but should not hit first-home buyers.
