Household Debts @ 89.9%

The nation’s household debt might be a lot higher than the recently announced 89.9 per cent of the gross domestic product, says Blindspot, an economic think tank. It said many Malaysians were overstretching their budget by borrowing from cooperatives and loan sharks.

The think tank said the nation should worry about these figures. The majority of family debts, its co-founder Azlan Awang explained, stemmed from purchasing a house and car, which are not cheap when compared with wages in the country.

The prices of houses, he pointed out, had skyrocketed over the years due to speculators who constantly buy and sell houses at higher rates.This subsequently caused the household debt to surge as families were forced to purchase more expensive homes.

“Unlike citizens in advanced countries, where they do not need to buy a house to feel secure as their government provides incentives, Malaysians do so to feel secure.“Due to that, it is our culture to buy a house,” he told FMTHe was asked to respond to an announcement made by Bank Negara Governor  Muhammad Ibrahim who said the nation’s household debt now stands at 89.9 per cent of the GDP.
He said household debt was one of the areas being monitored by the central bank on a regular basis, using macro-prudential measures.

Azlan said other than banks, a lot of cooperatives deducted salaries of staff for loans taken, which also contributed to the household debt. That is a big chunk of their salaries. Then, of course, there are loan sharks with huge interest rates. There are a lot of cases that are not reported.”

However, Azlan said that as long as people had jobs, the country’s household debt – which is the highest in Asia – “should not be a problem”, as people would have the means to pay.

Former RAM Holdings Group Chief Economist Dr Yeah Kim Leng, meanwhile, blamed the high household debt on increasing property and car prices, as well as the extended period given by financial institutions to facilitate higher loan payments.

According to a real estate property agent, prices of properties have almost doubled over the past two years in the Klang Valley.

Yeah, who is now a professor at Sunway Business University, echoed Azlan’s sentiments on jobs and managing household debts. As long as people have jobs, the household debt will not be a concern to Malaysians as they will have the ability to repay.