YOURSAY | ‘It looks more like an investment scheme than a scheme to resolve B40 home ownership.’
FundMyHome: Tong tells Najib 'you are wrong again'
The Wakandan: Former prime minister Najib Abdul Razak should be impressed rather than being sarcastic with this new initiative to help house owners to own houses.
Buying a house is getting very difficult due to increasing cost. Many fresh graduates even cannot afford a simple apartment, what more a landed property.
Any innovative ideas to help people own houses should be appreciated.
It must be understood that nobody is being forced to take up this plan, and neither will it cost the government anything other than its approval.
Ajlys: Najib, didn't your family also use crowdfunding to raise funds for your bail?
On the other hand, FundMyHome uses crowdfunding to facilitate the ability of young first-time house buyers to own a home, and the investors get a little bit of profit for chipping in.
Quigonbond: Najib aside - because he's just desperate to stay relevant - EdgeProp chairperson Tong Kooi Ong's letter does raise a number of questions.
If there are only institutional investors, it begs the question which government-linked companies (GLCs) or government-linked investment companies (GLICs) will be roped into this exercise.
And if the house owners fail to repay, and I doubt the government wants to make a bad political mess to foreclose their homes, will the GLCs bear the burden?
As a "social service" platform, will the platform be slow to foreclose/enforce? Will this turn out to be another National Higher Education Fund (PTPTN) with billions remain due and outstanding many years down the line?
Why would any board/their shareholders (not only the government but international investing institutions, private equity, international pension funds, etc) invest in what is at best meagre capital return (these are not commercial properties)?
If the institutions are banks, why wouldn't they lend money to these homebuyers already instead of participating in this scheme? If the GLC’s shareholders do not bear the burden, will the government stand in as a guarantor?
In other words, will the taxpayers ultimately bear the burden? What is the due diligence done for these homebuyers? Are they as tight as the one done by banks which are the obvious experts in this area?
I would appreciate if Tong or the Finance Ministry can quickly clarify this. Obviously, the whole scheme is lacking serious, fundamental details, seemingly relying purely on the assumption that these house owners merely lack initial financing, but actually has means to repay instalments.
We have to all ask whether this very assumption is valid, to begin with. Also, whether the government has exhausted all manner of bringing down property prices - for example, cutting down landholding tenure, build smaller houses, designating more areas for affordable housing etc.
Someone drew an analogy between this and the makings of our sub-prime crisis. They are not that far off in their analogy.
David Dass: This is not a home ownership scheme for the B40 (Bottom 40%) group.
How will the poor purchaser raise the 20% in the first place? How is he expected to raise the additional 80% after the five years? Especially after the property price has appreciated?
What happens to the poor purchaser when he is forced to vacate the property after five years? Does he need to raise the deposit to go into the market again? What happens to the property market after five years when thousands of houses go onto the market because the owners cannot go beyond the five years?
This may help developers clear up existing stock. But it does nothing to match the price of properties to incomes.
Follow the Singapore model. It is a proven system. Allow Singapore contractors to bid. And Singapore architects to design.
We have the talent. PM Dr Mahathir Mohamad should swallow his pride. And learn from the best in the world as far as low-cost housing is concerned.
Anonymous #49532740: Further to the questions raised by letter writer TK Chua, I wish to comment as below:
1. It looks more like co-ownership of a house by the buyer (20%) and investors (80%) with the buyer’s option to purchase or sell it and with the developer’s entitlement of first 20% of the gain (if sold) after five years and the investor will gain 5% annual return plus capital appreciation of the property.
2. The objective of the proposed P2P scheme is to resolve B40 home ownership. But does it?
3. Will it solve the B40 housing ownership issue after five years assuming B40 have the 20% to pay in the first instance? Without the 20% deposit, this proposal is not workable for B40.
4. Even if with 20% deposit the issue is: “What will happen to the buyer and his/her family if the buyer is not qualified for a loan to pay 80% of the prevailing market price” (the price after five years, not the price at the time of buying)?
5. If the income of the buyer has improved substantially to qualify him/her to obtain a loan to buy the house after five years, it will be fine. But how realistic is this?
6. If not, the house will be sold and the buyer becomes homeless again.
7. In the first instance, he/she can’t obtain a bank loan and thus opts to take up this P2P scheme. If so, how many of the buyers (not qualified for a loan in the first instance) will become qualified for higher loans after five years (assuming house prices have gone up after five years)? If not, home ownership for B40 will go back to square one.
8. Yes, it looks more like an investment scheme than a scheme to resolve B40 home ownership.
Elvin: It's an intriguing scheme, and I think:
1. In the UK, this is called "shared ownership", so you're right it's not ownership as such. However, the 20% owner has other owners' rights, i.e. to live there and to renovate the property.
2. The 5% return sounds like marketing to me, to attract investors. As is obligatory in many Europeans countries, such claims must always state that "the value of any investment can go up as well as down".
3. All investments are accompanied by risk.
4. UK shared ownership schemes can be bought over by the resident owner if, for example, in the intervening years the individual's income has gone up due to career progress, investments, etc.
5. I completely agree with you about property prices outpacing incomes, and this is probably why the likelihood of resident owners buying out their house is unlikely.
Anonymous_1527925538: People cannot afford houses because the price increases at a much faster pace than their income.
So after five years, the poor owner got thrown out because, in all likelihood, he or she still cannot afford to buy the house. The investors got to sell off the house and laugh all the way to the bank.
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