Relaxing banks' lending criteria is not the solution to address the issue of access to affordable housing loans, said the National House Buyers Association (HBA) Secretary-General Chang Kim Loong.
"The current problem is that house prices are too expensive in relation to the buyers' income. This has resulted in some prospective house buyers having their loan applications rejected. However, the solution is not to relax lending guidelines but to find ways to lower property prices. The relaxation of lending guidelines will surely worsen the situation and speed up the road to a â€˜homeless generation' that HBA has been warning about for years" he told SunBiz, addressing the Real Estate and Housing Developers Association's (Rehda) call for banks to be less strict in their lending criteria to allow more to buy their dream homes.
According to Bank Negara Malaysia's 2016 Annual Report, the increase in house prices since 2012 has outstripped the rise in income levels and prevailing median house prices are beyond the reach of most Malaysians.
Chang acknowledged that the average Malaysian today cannot afford to buy a property based on his or her current income and, if left unchecked, the housing crisis could lead to social problems.
"At first glance, it may appear that Rehda's proposal has some merits as it helps people who cannot afford to buy their dream homes to get the necessary financing required. However the proposal is very detrimental in the medium to long term and will only compound the problem that property prices are too expensive in comparison to income levels" he said.
Chang said such a move would only encourage developers to price new launches even higher and increase prices of existing completed properties, which would lead to higher costs such as legal fees and stamp duty.
"When it is known that banks are relaxing their credit criteria, owners of existing completed properties, especially the property speculators and investors club will follow the developers in increasing their selling prices. This will worsen the current situation as prices of both new and completed properties will increase at an accelerated rate" he added.
Chang said banks owe a duty of care to depositors and Malaysia should learn from the US, whose subprime crisis "recipeâ€ included overpriced properties, less than credit worthy borrowers and slowdown in the economy.
"Although Malaysian banks are in a much stronger and more resilient position since the Asian Financial Crisis, a subprime crisis in Malaysia could potentially devastate the domestic banking sector and trigger a widespread economic recession that could potentially spill over to the entire Asean region" he added.