PUTRAJAYA should address household debt rather than urge banks to ease credit for house buyers, said the Institute for Democracy and Economic Affairs (IDEAS).

Malaysia has a 76.3% rate of home ownership, which is relatively high compared with other countries but it is also saddled with a high rate of household debt at 82.2% of GDP, said IDEAS senior fellow Dr Carmelo Ferlito.

“We should look at the issue from a broader perspective.

“The government should focus on addressing the latter figure (household debt), rather than the former. This is all truer given the fact that loans for the purchase of residential properties continue to be the key driver of debt growth.

“A further easing of credit conditions will harm financial stability for those people which are already in a fragile situation,” Ferlito said in a statement today.

Since rising household debt is largely driven by housing loans, Finance Minister Lim Guan Eng should stop calls for banks to ease mortgage rules for first-time house buyers, he said.

“According to the minister, many potential homebuyers are finding it difficult to secure loans. This seems to be the case despite Bank Negara Malaysia and other banks already taking steps to ease credit conditions for first-time homebuyers.

Further credit easing is not the way to go.”

Lim has frequently appealed to banks to ease lending for house buyers and also urged those whose loan applications were rejected to complain to his ministry.

The government is also currently on a year-long home ownership campaign, aimed in part at reducing the property overhang.

Ferlito, however, said the property industry required a “market-oriented approach”.

The government should not intervene by aiding property purchases so that developers would learn to deal with the consequences of their investment decisions. – November 28, 2019.