Mortgage cap decision soon

Bank Negara Malaysia may make it harder for Malaysians to buy more than two houses as it seeks to stem speculative buying that is pushing up property prices.

Sources said the central bank would be meeting with banks next week to discuss plans for a mortgage cap whereby loans would be limited to a portion of the property value.

"The expectation is a cap of about 70-80 per cent. We think a directive will be issued to cap," said two sources with knowledge of the meeting.

Earlier, Bank Negara Malaysia governor Tan Sri Dr Zeti Akhtar Aziz said it was prepared to take pre-emptive action and that it has wide-ranging instruments to prevent a property bubble.

"We want to promote house ownership, but we want it to be done in an orderly manner and we don't want speculative activities," she told reporters on the sidelines of the Global Islamic Finance Forum in Kuala Lumpur yesterday.

She acknowledged that there may be pockets of bubbles forming in parts of Malaysia, but believes Malaysian banks are dealing with this through their own risk management process.

Areas like the Klang Valley and Penang have reported strong property demand.

In June this year, some 147 double-storey terrace houses just outside of Kuala Lumpur priced from RM1.75 million each were sold out in just five hours.

Rising property prices have been fuelled by low borrowing costs, the continuing promotions by developers and expectations of a recovering economy.

More money is also flowing into Asia from developed economies where interest rates are low as investors seek higher returns elsewhere.

But this is not unique to Malaysia. Regulators in China, Hong Kong and Singapore have imposed measures to cool their property markets.

Zeti also said that "massive" financial literacy programmes would be rolled out as a pre-emptive measure.

These would be aimed at those aged below 30 to help them better manage their finances at the start of their careers. - By Shahriman Johari (Business Times)