Malaysia enacts cooling measures of its own

Malaysia is the latest Asian country to implement property market cooling measures on the heels of China, Hong Kong, and Singapore.

The country’s central bank yesterday imposed a new loan-to-value ratio of 70 per cent on homeowners buying a third residential property, Reuters has reported. Loan-to-value is the percentage of a property’s value that is mortgaged. The new value will not be enforced on first and second property purchases though, and analysts foresee the measure as having only limited success.

“The measure aims to support a stable and sustainable property market and promote the continued affordability of homes for the general public,” Malaysia’s central bank said in a statement. The central bank downplayed bubble fears though, noting that aggregate growth trends for property prices remain largely manageable. Governor Zeti Akhtar Aziz had said previously that the bank would not wait for a bubble to form to take action to cool the market.

Malaysia’s household debt is the highest in Asia at 77 per cent of GDP. Analysts said that the measure indicates concern by the government about the high level of debt and shady mortgage lending practices. House prices in Malaysia rose 32 percent between 2000 and 2009, but some areas of the country have seen a big jump in prices this year.

“I think the intention is not to overkill the property sector. It is a very targeted measure aimed at speculation,” said CIMB economist, Lee Heng Guie.

The central bank held interest rates steady at its last meeting after raising them three times to 2.75 per cent and is not expected to announce any changes this month. Citi analyst Kit Wei Zheng said that measures like the new loan-to-value ratio served as a substitute for further interest rate hikes to curb financial imbalances down the line.