hmmmm....What if bank counter that with better package? BLR - 2.5 or more ....

Bank Negara maintains OPR at 3%
Written by theedgemalaysia.com
Thursday, 07 July 2011 18:04

KUALA LUMPUR: Bank Negara Malaysia has maintained the overnight policy rate (OPR) at 3% at its Monetary Policy Committee (MPC) on Thursday, July 7.

In a statement today, Bank Negara said the global economic recovery in the second quarter of the year was affected by supply disruptions arising from natural disasters and geopolitical developments, the impact of fiscal consolidation measures, the more uncertain conditions in the global financial markets and the higher commodity prices.

Going forward, global growth will remain highly uneven across regions, with increased downside risks, it said.

For the region, growth is expected to be sustained by robust domestic demand, increased investment activity and intra-regional trade, said the central bank.

Bank Negara said that in the domestic economy, the latest indicators pointed to a moderation in growth in the second quarter, due primarily to slower external demand, greater than expected disruptions in the global manufacturing supply chain and lower than projected public sector investment.

Private consumption and investment have, however, continued to be important drivers of growth, it said.

“Going forward, growth is expected to improve, underpinned by continued strength in private consumption and private investment.

“This growth prospect however, could be affected by the heightened external risks,” it said.

Bank Negara said domestic headline inflation increased to 3.3% in May on account of higher food and fuel prices.

Supply factors continue to be the key determinant affecting consumer prices with global commodity and energy prices projected to remain elevated, it said.

There are also some signs that domestic demand factors could exert upward pressure on prices in the second half of the year, it said.

“The MPC’s assessment is that the risks to inflation are on the upside. While the outlook for growth remains positive, there are heightened uncertainties arising from global developments that have created higher downside risks to growth.

“The MPC will assess carefully the evolving economic conditions and to the extent that the growth momentum is sustained, further normalisation of monetary conditions will be considered to safeguard price stability,” it said.

20% Drop in Housing to Cause Recession in 2012, Says Gary Shilling
By Peter Gorenstein

Stocks rallied Wednesday after Federal Reserve Chairman Ben Bernanke suggested the central bank would go ahead with another round of stimulus -- aka quantitative easing -- if the economy continues to slump. In this scenario, the Federal Reserve would once again purchase assets to keep interest rates low in an attempt to support the economy and prop up asset prices.

So far, the Fed's actions have done more good for asset prices like stocks (see: S&P 500 chart since 2009) while doing less to help the economy (see: June jobs report). U.S. gross domestic product grew just 1.9% in the first quarter of the year. For 2011 as a whole, the Fed forecasts U.S. GDP growing at 2.7% to 2.9%, which is lower than the plus 3% forecast they made in April.

Today's guest, Gary Shilling, President of A. Gary Shilling & Co. and author of the Age of Deleveraging says another recession is brewing -- no matter what action the Fed takes. "Economic growth here and abroad is slipping, making a 2012 recession a distinct possibility," he writes in his July newsletter. And, "when you have slow growth it doesn't take much of a shock to throw you in negative territory."

Shilling says the shock to trigger the next recess is "another big leg-down in housing." (An asset class the Fed has not been able to reflate.) As those familiar with Shilling know, his forecasts are generally bearish. However, in his defense, Shilling was one of the few economists who correctly predicted the dangers of the subprime mortgage market and its impact on the broader economy.

The problem with the real estate market remains excess inventory. Based on Shilling's research, there are 2 million to 2.5 million excess homes in the country -- a supply that will take 4-5 years to work-off. The result: Housing prices will fall another 20% and underwater mortgages will balloon from 23% to 40%, he says.

With housing slumping again, Shilling says recession is coming to a town near you in 2012.

Property outlook turns cautious
Written by Yantoultra Ngui Yichen
Friday, 15 July 2011 14:57

KUALA LUMPUR: Industry players and research houses have started to turn cautious on the outlook of the property sector, especially in the higher-end segment, on the back of declining growth rate of residential loan approvals and poor external factors.

This comes amidst the rollout of some mega property projects such as the 1Malaysia People’s Housing Programme (PR1MA) and the impending development of large tracts of land surrounding Greater KL’s integrated urban transportation system.

“There have been mixed signals from the indicators, namely the (upward trend) transaction volumes and the (downward) growth rate of residential loan approval,” CLSA Asia Pacific Markets said in a research note on Wednesday.

“As such, we are becoming more cautious on the share price performance of the property developers and have downgraded our sector rating to ‘neutral’ from ‘overweight’,” it added.

CLSA said it believed certain elements of optimism of the physical market had been priced in the stock prices of the property developers.

“The persistent price growth for each quarter may not be sustainable going forward given that such strong performance had continued for the past six quarters consecutively,” it said.


The slowing growth rate of housing loan approvals and negative external factors have prompted research houses to look at downgrading ratings on Malaysia's property sector
Indeed, the KL property index had outperformed the KLCI last year and the first half of this year by 11.3% and 3.8% respectively, mainly supported by consistent year-on-year house price growth of 6% to 8% in each quarter since the fourth quarter of 2009.

Notwithstanding that, CLSA said the potential change in computing household loan based on net income rather than gross income, though currently just at the proposal stage, was likely to impact the higher-end residential units if implemented.

Nonetheless, an industry player said there shouldn’t be any worries as long as the location of the property was strategically situated but admitted that the sector’s outlook looked gloomy in the medium term.

“Although prices of these properties can still go down such as those seen during the Asian financial crisis in 1997, they will recover strongly when the economy is back on track,” an industry player said.



“But anything longer than two years from now, I can’t really tell. I am a bit cautious as the external factors are still looking pretty negative,” he added.

He said the external factors included the negative outlook in the US recovery story, spread of the eurozone debt crisis and inflationary pressure in countries such as China.

Indeed, the recovery of the US economy still looks bleak. According to a recent news report, the US trade gap widened much more than expected in May as a jump in oil prices helped push imports to the second highest level on record.

The trade deficit amounted to US$50.2 billion (RM150.6 billion), the highest since October 2008. This is on the back of its imports rising by 2.6% to US$225.1 billion, the highest since the record of US$231.6 billion set in July 2008 just before the global financial crisis took a huge toll on global trade.

Adding to that was the persistent euro sovereign debt woes. Moody’s Investors Service on Tuesday, cut Ireland’s credit rating to junk status, saying the country will likely need further official financing before it can return to international capital markets.

Although growth in China still remained intact despite annual gross domestic product (GDP) growth easing to 9.5% in 2Q11 from 9.7% the previous quarter, inflationary pressure still remained a major concern in the world’s second largest economy.

An analyst said although projects such as the PR1MA and MY Rapid Transit would continue to give a boost to the property sector, the overall economic growth of the country was still dependent on its trading partners.

According to a report quoting International Trade and Industry Minister Datuk Seri Mustapa Mohamed, US and China topped the country’s top five export destinations in 2010.

Nevertheless, property launches are still hot in the country. For one, Mah Sing Group Bhd recently rolled out its RM3 billion Icon City, located at the intersection of Damansara-Puchong Highway and the Federal Highway in Petaling Jaya.

According to news report, the first phase of the project, 30 Jewels, comprising seven- and eight-storey lifestyle shop offices was recently previewed and 19 units valued at RM192 million were taken up.

The second phase, which comprises two- and three-storey retail lots, small office versatile offices and residential units, are now opened for registration. According to news reports, the offices, with built-ups of 750 sq ft and 990sq ft, were priced from RM750 psf.

With the gloomy outlook in the global economies and declining growth rate of residential loan approvals in Malaysia, it remains to be seen if the property sector, be it property stocks or property prices, can sustain its growth in time to come.

ask ourself and the people you know whether they have/hv not over leveraged then we'll roughly know how the local prop market future lies.. if you sense the greed now potentially we may have idea where the property price heading in near future. Don't overlooked external factors as well.

many, in particular chinese are looking their way out of the country ... some are buying their way out. Anyone here prefer to work & permanently reside overseas given the chance?

anything goes up must come down ... just a matter of time. Invest wisely irregardless of good or bad time.

Down to a support level lar .... like share market

Short-term impact on property sales
By EUGENE MAHALINGAM
eugenicz@thestar.com.my


PETALING JAYA: CIMB Research expects the proposal by Bank Negara to modify the mode of calculation for household loans to curb domestic speculation in the local property sector to have only a short-term impact.

“We think that any measures to curb domestic speculation are likely to have only a short-lived impact on physical property sales, as was the case when a flat 5% RPGT (real property gains tax) was levied in October 2009 and an LTV (loan-to-value) ratio of 70% was imposed on the third-property purchase in November 2010.

“In both cases, the impact on the real property market was a wait-and-see attitude by buyers for two to three months before they rushed back into the market when they realised that house prices were firm and still rising,” it said yesterday.

The research report was in reference to a recent local news story which reported that the central bank had issued a white paper to obtain feedback on the possibility of basing the calculation of household loans (mortgage and hire purchase) on net pay instead of gross pay.

“The report is yet to be confirmed and even if the measure is implemented, we believe it could be mild as the intention is to curb speculation, not hammer overall sentiment.

“Even if we assume the worst-case scenario where a change in the calculation results in a 26% fall in affordability, in line with the maximum personal tax rate, the affordability ratio is still very healthy,” said CIMB.

CIMB noted that a share prices of property stocks had been on a downtrend since the news report, which also spilled over to construction companies with significant property exposure.

The research house believes that the Government would be careful not to implement measures that would have too negative an impact on the property sector as it would still want to encourage home ownership, and restrictions would have the opposite effect.

“The Government hopes to unlock the value of its idle land in the Klang Valley and measures that would hurt the sector could result in lower bids for the land, and the performance of the property sector affects other key sectors of the economy and property restrictions in the run-up to general elections may not be popular,” it said.

Loan-deposit ratio at 7½-year high
Written by Joyce Goh
Thursday, 21 July 2011 11:37

KUALA LUMPUR: The banking industry’s loan-to-deposit (LD) ratio recently hit a 7½-year high, which could likely spur further competition for deposits, slow the pace of loan growth and raise borrowing costs.

In February, the LD ratio rose to 81.9% and remained at 81.8% in May, according to data by ECM Libra Research.

Its previous high was 82.8% in October 2003 and dropped to a low of 68.9% in March 2007.

A high LD ratio shows a diminishing source of funding avenue for loan growth from deposits, as loan growth has outpaced that of deposits in recent years.

Analysts also attribute the slower growth in deposits to alternative — and higher yielding — investments available to the public, such as equities and properties. These classes of assets are seen as offering higher yields and providing a better hedge against inflation compared with fixed deposits.

As such, banking analysts believe that competition for deposits among banks will likely continue to intensify. This could increase higher funding costs for banks, which in turn could result in either narrower margins or higher lending rates, likely through larger spreads over the base lending rate (BLR).

“It’s easier to grow loans given the strong demand in the property sector, the primary engine of loan growth. In the past, banks have lazy balance sheets compared to now. The (previously low) LD ratio then provided room to grow loans, even when deposit growth lagged behind.

“But today, the competition landscape has changed as banks are competing not just for loans but also deposits. While fixed deposits still form the major source of retail deposits, competition is also heating up for CASA (current account savings account) deposits,” ECM Libra’s head of research Bernard Ching told The Edge Financial Daily.



“Besides retail deposits, other funding avenues for loans include interbank deposits, term funding and equity. However, these types of funding are more expensive than retail deposits. As such, should retail deposit growth continue to lag behind loan growth, banks may have to look for more expensive sources of funding. This will add further pressure to NIM (net interest margin) which has been depressed by intense competition in the mortgage market,” he added.

Indeed, the rush for deposits is highlighted by some aggressive campaigns for deposits in the last few months, which include lucky draw prizes, free gifts and step-up tiered interest rates. Public Bank, for instance, is offering 10 prizes each month for six months up to September for new customers who open a savings or current account. Each winner will get between RM6,800 and RM36,800.

While the LD ratio has climbed, the financing-deposit ratio also recently touched a multi-year high.

The financing-deposit ratio includes the financing and deposits of the Islamic banking industry, apart from the conventional banks.

Since mid 2010, the financing-deposit ratio has hovered around 88%, which is an almost 7-year high. The last it was at that level was in November 2004, when it was at 88.7%.

“The financing-deposit ratio gives a more complete picture as it includes financing and deposits from Islamic banking activities,” said Ching.

He added that the recent hike in the SRR (statutory reserve requirement) would have an impact on the cost of funding, but would not affect the competition for deposits as much.

Bank Negara Malaysia (BNM) recently raised the SRR by 100 basis points (bps) to 4%. This 100bps increase is seen as normalising the SRR to the pre-2009 financial crisis level of 4%. The SRR was maintained at this level for 10 years — from September 1998 to November 2008.

Despite the SRR’s increase from 1% to the current 4%, it is still significantly below its 13.5% peak in June 1996, as well as the post-1997 financial crisis’ 12-year average of 4.9%.

Meanwhile, Lim Sue Lin from HwangDBS Vickers believes banks will also be pushing for deposits to fulfil the Basel III requirements for liquidity purposes.

“There are no minimum requirements for now, but it is subject to an announcement later. It’s some buckets of liquidity that they have to maintain,” the senior banking analyst told The Edge Financial Daily.

BNM statistics show that loans expanded 13.7% year-on-year to RM934.5 billion in May this year while deposits grew 11.3% to RM1.19 trillion. According to the central bank’s 2010 financial stability and payment systems report, some 31% of household financial asset comprises deposits with banking institutions and development financial institutions.

Another analyst noted that the fact that loan growth is outpacing deposit growth shows that Malaysian households are borrowing more than they save, which is also reflected in the country’s high household debt-to-GDP ratio.

“Household debt has increased but salaries for most of the general population have not grown in tandem,” he said, explaining that a large amount of a person’s income currently goes towards servicing housing and car loans. “With rising inflation, households’ disposable income will fall and there is less money to save,” he added.

The household debt-to-GDP ratio in Malaysia has risen since 2008, hitting 75.9% in 2010. Meanwhile, the household debt service ratio – the ratio of household debt payments to disposable income – was 47.8% last year. This means that Malaysians spend nearly half of their pay on servicing loans.


This article appeared in The Edge Financial Daily, July 21, 2011.

Higher inflation?
By JAGDEV SINGH SIDHU
jagdev@thestar.com.my


Economists cautious as producer prices keep rising

KUALA LUMPUR: Economists suspect inflation may have reached their peak levels in June but remain wary over the prospect of further rises stemming from higher producer prices.

A higher base effect from the second half of last year and the recent sideways movement in the basket of commodities, especially food prices, will help contain the rise in inflation but a 10.6% jump in producer prices in May is expected to work its way to consumer prices should companies decide to pass on the higher costs.

Producer prices have risen for the seventh straight month and May's number was the fastest pace of increase since September 2008.

“There are also the risks of pass-through and secondary effects on consumer prices from higher production and operating costs following the hikes in gas prices, electricity tariffs and the removal of super subsidy on diesel for commercial vehicles (mainly in the logistics industry) and deep-sea fishing vessels,” said Maybank Investment Bank Bhd in a report yesterday.


Feeling the pinch: Costlier chicken, among other food, has contributed to the 3.5% rise in June inflation

CIMB Research head of economics Lee Heng Guie in his report said increased cost and margin pressures were expected to force producers to pass through the cost to consumers gradually.

Inflation rose by 3.5% in June, which was the fastest pace of increase since March 2009.

Contributing to the big increase in inflation was food, with an increase of 4.7% from a year ago because of costlier chicken, fish and vegetable prices, and transportation, which was up 5.8%.

The subsidy rationalisation of the electricity tariff increase in June had a negligible effect on inflation in June but the reduction in sugar subsidies had caused a spike in sweets and other confectionary.

“The average 7.12% electricity tariff hike in June had a manageable knock-on impact on overall inflation as the housing, water, electricity, gas and other fuels' category rose 1.9% year-on-year and 0.1% month-on-month in June,” said Lee.

Since 75% of consumers would not fork out more for electricity as they consumed less than the threshold for a price increase, economists said the overall influence on inflation was muted. Furthermore, electricity accounts for 2.9% of the consumer price index.

Lee said inflation had probably peaked in June and expected it to ease in the second half of this year.

“First, the food inflation and transport price index, which accounted for 2.1% of the increase in the headline inflation in the first half of 2011, has come close to returning to its historical month-over-month trend growth rate,” he said.

“The second factor is the base effect inflation was much lower (average 1.5% year-on-year) in the first half of 2010 than in the second half of 2010 (average 1.9% year-on-year). As such, the combination of slower month-on-month price growth and a higher year-ago base will result in a slight drop in inflation to 3.2% to 3.4% year-on-year in the second half of 2011.”

He is maintaining his CPI growth forecast of 3.2% for this year.

How Bank Negara reacts to the June report for inflation in raising interest rates is also uncertain at this juncture. Some economists feel with inflation being more closely monitored than in the past, a 25 basis-point increase in the overnight policy rate remains a possibility for the September meeting.

Others think inflation at the current levels, and where the outlook for costs gets more benign towards the later part in the year, may not be enough to convince the central bank that a move toward the normalisation of interest rates will be the proper response in view that economic growth prospects are still shaky at the moment.

The younger generation will still afford ......just not close to prime area. And can forget about city center. Rawang may be part of Greater Greater KV in the next 30 yrs

why dont someone start a poll to survey number(%) of forumer in LYN thinks whether property will continue rising / fall / stagnant in 2012 onwards? Ppl will be able to plan the next move using the figures

Jul 23, 2011
Ensure a sustainable local property market

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There are a number of measures that can be put in place to ensure the local property market continues to be healthy, sustainable and does not succumb easily to any adversities.

It was just barely three years ago that we witnessed the widespread contagion effect of the collapse of Lehman Brothers on the world economy.

The external front is still shaky and there is a strong likelihood that a second and more severe financial crisis, or “double dip” may happen.

With a growing number of European countries going into debt crisis, the next big trigger may come in the form of a debt default by the US following its ballooning deficit.

To avert a potential meltdown from the frail external economic conditions, it is important to build a strong foundation for the local market.

There are potential hazards lurking that may cause the market to lose substantial value if we are not careful.

Among the potential hazards include over-speculation and over-commitment to household loans that may lead to disability to service the loan, and result in higher incidence of non-performing loans.

Bank Negara is closely monitoring the market for signs of overheating and a potential policy tightening may be in the offing.

The central bank is reportedly looking at modifying the mode of calculation for household loan (that covers mortgage and hire purchase) from gross pay to net pay.

If the measure is implemented, it will mean that borrowers will only be eligible for a lower loan amount based on a percentage (usually up to a third for housing loan repayment) of their take-home pay after deducting payment of income tax, and contribution to the Employees Provident Fund and Socso.

The measure should be welcome as it will curb over-commitment in household loan and ensure there is enough left for other household expenses.

Over the past two years or so, many Malaysians have joined in the rush to buy property as the market has been overflowing with cash, and property is the biggest beneficiary of this high liquidity in the system.

I believe one of the main reasons for the sharp and rapid appreciation in property prices can be attributed to the fact that there are very few alternative investment options around for investors.

To “dilute” the high appetite for property, it is necessary to open up other viable investment options so that those with surplus cash can have other alternatives to turn to. In fact investment in unit trust has become quite popular as it actually fit the needs of those with lower risk appetite and do not like the volatility of the stock market.

Raising savings interest rates will also be a good measure as it will attract more people to park their money in the banks again.

With more people saving with the banks, financial institutions will have more funds to lend to corporate borrowers who need funding to expand their businesses.

New start-ups and small and medium-sized enterprises (SMEs) are among the critical groups which need a helping hand from the banks to provide loans for working capital and expansion plans.

There have been feedback from some smaller enterprises of the increasing difficulty in seeking loans from banks. Instead of just lending to mega corporations, banks should also pay attention to the smaller outfits as most of the big and successful firms today started out small once.

Of course the normal due diligence and screening of the borrowers to access their credit worthiness has to be undertaken to avoid unnecessary problems later.

These enterprises should not be underestimated as they will be able to act as a “cushion” should there be another economic or financial crunch.

From the previous meltdown, we have witnessed how fragile the financial and investment markets can be.

Although the property market is generally quite benign and not as volatile as the financial markets, the sharp hike in prices over the past two years have started to cause alarm in some quarters that the market is overheating.

Although the sharp rise in prices is evident in certain places, notably the Klang Valley, Penang island and some parts of Johor, even some quiet markets like Ipoh and mainland Penang have also charted unusual price gains.

It’s true that many savvy investors have benefited from the sharp price appreciation of the past two years, but there are more people who have been affected by it.

They are caught in a rather difficult situation of having to fork out at least a 20% to 30% increase in property price and higher downpayment for their purchases.

Whether one is a potential buyer or seller, tenant, land owner, developer, or from the governing authorities, we are all stakeholders in the market, and should lend our support to ensure it remains stable and sustainable.

·Deputy news editor Angie Ng believes it pays to be prudent and not compromise on the sanctity of the market.

Opps... sorry moderator CHERROY .. last piece ya ... no more after

Jul 21
2011 CIMB Research Bullish On Residential Property Sector
Posted by Thinkproperty.my News Team in News, Bernama


KUALA LUMPUR: CIMB Research, which is bullish on residential property market, has maintained its 'overweight' rating on the property sector.

It has also maintained 'outperform' rating on all developers.

In a report today, CIMB said investors should continue to accumulate property stocks on weakness.

CIMB said share prices of property stocks had been on downtrend since a weekly magazine reported on the possibility of a change in housing loan calculations from gross to net pay.


"The selldown is excessive as the jitters had even spilled to construction companies with property development exposure," it said.

It said the report has yet to be confirmed and even if the measure were to be implemented, it was likely to be mild as the intention was to curb speculation, not to hammer overall sentiment.

CIMB said there has also been talk of the possibility of the proposal of a higher real property gains tax for commercial property in the 2012 Budget.

It said the weakness in share prices of both property developers and construction companies offered buying opportunities. - Bernama

not a bad ideea too ...

noticed many taikos MIA?

Becoz their grandson/grandaughter will most probably be taken care by their own parents. Similar to what happen in China now ...

I am predicting next year many flippers will get drown looking at the current buying trend... most young investors targeting new dev due to inflated subsale prop which are far ahead of valuation

most people dont plan to fail, but fail to plan