Beware bubble trouble: RBA
George Lekakis; From: Herald Sun; March 26, 2010 9:32AM


THE Reserve Bank is supporting moves by retail lenders to tighten credit standards in the home loan market, warning that surging property prices might still lead to a speculative bubble.

Assistant governor Philip Lowe yesterday told a business forum in Sydney that recent economic data showing employment growth and rising house prices had given the RBA confidence that the economy was now in "a reasonably solid upswing".

While acknowledging there were signs that the property market might cool in the coming months, he cautioned banks against relaxing loan-to-value ratios and other lending rules.

"On the financing side, we are currently not seeing the type of

financial developments that caused concern in 2002 and 2003 when maximum loan-to-value ratios were being raised," he said.

"This is good news, as it would obviously be unhelpful if a speculative cycle were to emerge on the back of the recent strength in housing prices.

"This is an area that lenders and current prospective home owners will need to watch carefully over the months ahead."

The country's largest lenders -- Westpac and Commonwealth Bank -- this year have increased the minimum deposits required by home loan applicants on concerns that more property buyers will find it difficult to service debt in a rising rate environment.

Dr Lowe said the RBA expected the Australian economy to continue growing strongly this year on the back of a recovery in business investment, particularly in the resources sector.

"Recently, the spot prices of iron ore and coal have risen, and the prices that exporters will receive over the next year look likely to be substantially higher than those received over the past year," he said.

"As a result, a significant rise in the the terms of trade is expected over the year ahead."

Dr Lowe's cautiously upbeat outlook came as the RBA gave the Australian banking system a near-clean bill of health in its latest financial stability review.

Data collated by the review appears to contradict recent suggetions from mortgage experts that home borrowers are stretching to meet loan repayments.

As at the end of December, the RBA found that about half of all owner-occupiers were "ahead of schedule" on loan repayments.

However, the review highlighted that continuing weakness in the commercial property market had been a driver of non-performing loans in the major banks' business lending books.

"There has been a more significant deterioration in the quality of banks' business loan portfolios, particularly for commercial property, and this remains an area to watch closely in the period ahead," the RBA said in the review.

"Nonetheless, recent indications are that banks' overall loan losses may have peaked and that profits have again begun to increase."

The review noted that overall debt-to-equity ratios were falling among listed property trusts but that the average gearing ratio of 80 per cent was still well above the long run average of about 60 per cent.


http://www.heraldsun.com.au/business/beware-bubble-trouble-rba/story-e6frfh4f-1225845854235

when will the bubble burst? is property prices in selangor overtly priced?

would this new housing loan scheme becomes a double edge sword by creating an artificial home demand?


Tuesday March 30, 2010
EPF to launch new housing loan scheme soon
By IZATUN SHARI
newsdesk@thestar.com.my

KUALA LUMPUR: EPF contributors should hold off using the money in their Account II to buy a house until the new scheme which would enable them to obtain a higher housing loan is implemented.

Chief executive officer Tan Sri Azlan Zainol said while EPF was keen to launch the scheme as soon as possible it had to wait until the banks were ready to implement it.

“The banks are studying it. In principle, they are agreeable,” he told reporters at the International Social Security Association (ISSA) technical seminar here yesterday.

During the tabling of the Budget last October, Prime Minister Datuk Seri Najib Tun Razak had announced that the government would launch a scheme to enable EPF contributors to utilise current and future savings in Account II in January this year.

Najib said the scheme, which would enable EPF contributors to be eligible for higher financing to purchase higher value houses, was limited to a purchase of one house at any one time and subject to conditions stipulated by EPF.

During the tabling of the Budget, Najib had also announced the establishment of the 1Malaysia retirement savings scheme where, as an incentive, the Government would contribute 5%, subject to a maximum of RM60 per annum for every RM100 contribution in addition to the existing dividend paid by EPF.

This scheme is for the self-employed and those without fixed income such as taxi drivers, hawkers, farmers and fishermen, who retire without pensions or any form of EPF savings.

Azlan said the 1Malaysia retirement scheme had received encouraging response; it had recorded RM3.4mil in total savings from 8,000 contributors since its establishment on Jan 2.

Of them, 3,000 are self-employed traders.

While contributors can contribute a minimum of RM50 or a maximum of RM5,000 to the scheme monthly and may withdraw their savings upon attaining the age of 55, the Government’s contribution is only for five years.

Will a same event like this will happen this 2012 year? No one know yet, well, no one EXACTLY knows yet.