Lawmakers worried over home purchase scheme

Friday, May 15, 2009
Issue 702, Page 1 & 3
Word count: 654
Published in: Macau Daily Times

By Poyi (Natalie) Leung

The government’s plan to guarantee part of first home buyers’ down payments was not well received at the legislature yesterday, as many lawmakers were concerned that the scheme would get residents trapped in negative equity.

Secretary for Transport and Public Works Lau Si Io and his cabinet presented the bill to request for the Legislative Assembly’s (AL) approval for the SAR government to assume the 700 million pataca debt in order to provide effects for the “Home Purchase Credit Guarantee Scheme”.

The bill was being put into an emergency procedure, and as such deliberation at the standing committee level was waived and lawmakers were required to cast their final votes in the plenary meeting.

The secretary said an emergency procedure was necessary as the government hoped to launch the credit guarantee scheme together with the “Four Percent Home Loan Interest Subsidy Plan” both in the form of an administrative regulation.

He also said that it was a “good timing” since the local property market was “relatively stable”.

However, the discussion could not be completed yesterday and AL president Susana Chou announced that the final voting of the bill will be conducted on the May 20 plenary meeting.

According to the secretary, Macau permanent residents over 18 years old and never own real estate are eligible to apply for a government guarantee on no more than 20 percent of the down payment, when purchasing their first residences at a maximum valuation of three million patacas.

The applicant however must have to be responsible for at least 10 percent of the down payment.

The credit guarantee will be valid for 15 years.

Although the government’s objective is to relieve residents’ financial burden when making home purchase, a majority of the lawmakers raised concern about the effectiveness and doubted whether the scheme would be counterproductive.

Ng Kuok Cheong said the measures, including the credit guarantee and home loan interest subsidy, were a means of the government to “promote the sales of real estate.

“It [credit guarantee] will encourage people to lend more than they can afford and thus I express large reservations on the bill,” Ng added.

Au Kam San pointed out that the current global financial crisis was triggered by “excessive subprime mortgage”, adding that the scheme would drive residents to become a home buyer even though they might not have the capacities to pay off the entire loans.

“These people will just get themselves in negative equity in the future,” he said.

However, the secretary responded that the government was only trying to offer “one more option” for locals.

He also said that due to the current economic climate, residents themselves should be aware of the importance to first evaluate their risks in buying real estate.

Jose Pereira Coutinho at the same time opposed the introduction of the credit guarantee scheme.

“When more public housing is completed, those residents will still in a hard life try to repay the home loans,” Coutinho said.

Leong Iok Wa also said that the government’s plan will influence banks’ normal assessments and make them approve loans to residents who in fact do not have sufficient financial capacities.

“Eventually it will push people to buy real estate at an unreasonable price and jeopardise the use of public funds once the lending turns to bad debts,” she added.

In addition, Kwan Tsui Hang said the government’s credit guarantee will end up push up property prices, which should start to drop these days due to the financial crisis, large deportations of imported workers and the suspension of the investment immigration program.

“It [the scheme] is not only a risk for the government, but also for banks and local residents who can’t forecast how the economy will be like sooner or later,” she said.

Secretary Lau however emphasised that the government will still implement the “Four Percent Home Loan Interest Subsidy Plan” even if the credit guarantee scheme cannot go through the legislature.

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