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Bank Negara ready to act on property if need be

KUALA LUMPUR: Malaysia's central bank will clamp down on any speculation that threatens to create a property bubble, the central bank chief said on Thursday, Oct 28.

Governor Zeti Akhtar Aziz said the central bank wanted to promote house ownership but it had "wide ranging instruments" to deal with any excesses in the sector.

"For first time houseowners and perhaps even the second one, any new rules would not apply. It would only be for those that want to purchase 10 units at time, I believe that happens sometimes," she told reporters on Thursday.

"If we consider that there is imminent risk of a property bubble, we will take pre-emptive action. We're not going to wait for the bubble before taking action."

Although Asian policymakers are mostly concerned about hot money from developed countries, CIMB notes that Malaysia has the highest household debt in Asia outside of Japan.

It said household debt hit 76% of GDP in 2009 and is expected to ease to 74.6% by the end of this year, making domestic consumption sensitive to further interest rates rise.

Flows

House prices in Malaysia rose 32% between 2000 and 2009, but some areas of the country have seen a big rise this year.

A condominium near the business district in the capital was recently sold for $12 million (RM37.34 million), making it among the most expensive homes sold in recent years, a local newspaper reported in July.

Policymakers in Hong Kong, Singapore and China have imposed measures to calm their heady property markets this year as investment flowed into Asia from developed countries.

Zeti said Asia was well placed to deal with these capital inflows due to better developed financial markets, rigorous surveillance and a larger regulatory policy toolkit.

"We have more rigorous surveillance, we know almost real time about these flows, where they come from and where they are placed, whether equities, bonds or deposits. We are better positioned now to deal with it," Zeti told reporters.

To a suggestion on implementing a single Asian currency, Zeti said she was not in favour of such a move as the objective of achieving greater prosperity for the region could be achieved at a much lower cost. — Reuters
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