Thursday, February 21, 2019

EPF & Housing Mortgages

It will be one of the greatest errors of social policy if the current proposal by housing developers for individuals to use their EPF to fund the mortgage repayments of their houses.

1. If demand for housing is poor and houses are not affordable to the ordinary person in the street, the logical thing to happen is for houses prices to fall and developers to lose money. We cannot afford to ask ordinary people to pay good money to overpriced properties so that profits from real estate projects can be sustained.

2. To release the bulk of the EPF to real estate will maintain property prices higher than warranted by the market, ie the incomes of the people. By not doing so, property prices will be lower and at a level that ordinary people can afford without having to raid the bulk of their EPF.

3. If EPF is used to fund housing mortgages, when there is a crash in the property market which it surely will, then ordinary people will be the victim of real estate speculation perpetuated by real estate developers.

4. I take the view that the real estate market, not only in Malaysia but around the major cities of the world - now happening in London, Brexit not withstanding - will take a major crash - put conservatively at at least 40% down. The situation is akin to the Japan asset bubble which has taken more than 30 years to recover.

5. I think the current EPF policy on housing should stay as it is. The EPF policy is probably one of the best conceptualised schemes in the world for the ordinary person. The only problem now is that wages have been too low and inflation due to the mismanagement of the economy since 1980 has a most devastating impact on the cost of living and the standard of living of the wage earning population.

6. Why is the government bolstering the profits of corporations and not taking a more social oriented stance on relative prices in Malaysia? Time to end politicking for profits for the elite.