That is end of the world scenario..

The funny thing is, when everybody expecting a crash, it will go up further. Then everybody buy and buy. Then it really crashes and everybody get caught. And this funny thing always happens..

Seems like interest rate going to rise again in short term. China increase its interest rate has somehow put pressure on BNM to do the same. BNM is mimicking China's moves nowadays anyway.

http://www.theedgemalaysia.com/business/18...ing-growth.html

http://www.theedgemalaysia.com/business/18...-economist.html

http://biz.thestar.com.my/news/story.asp?f...85&sec=business

When the above happens, property prices will start to stagnant or slow in rising in the near term. The last round of interest rate increase has not really dampen property dampen property transaction in popular areas so BNM might feel safe to increase another 0.25%.

Just has a rough check on Ipoh property prices recently. Seems like the price there also has increase about 40%++ averagely compare to my last checking which is like 2 years ago. An average decent 22’x75’ double storey house is now selling for a range of RM250k to RM290k depending on location and amenities offer. On my last recount, the same would be selling for around RM170k to RM220k.

Then I dig further and realize that the price increase is mostly due to inflation and better construction material offer, rather than speculation coz the secondary house market has not increase much compare to new launches. Still generally on the current price level, houses are still selling there.

This post has been edited by lch78: Jul 11 2011, 09:55 PM

Penang island property always has support due to the scarcity of land there. Not too sure about mainland. The moment the property prices drop 5% in Penang island, the demand will surge 50%..

Now with inflation surging and property prices go beyond affordability level of mass population, expect prices to stagnant or moderate in the coming months until don't know when the disposable incomes and savings level goes up/catch up, then it will be BBB again.

My take is in the next 6 months or so, property prices will come under increasingly downward price revision pressure. Whether or not this pressure works hinges on ETP implementations or specifically the MRT project that is about to take place or not?

M'sia is quite immune to external factors for the last 10 years or so. If external factors are not adverse, it has little effect on local property market. After all, the local market cost base is quite low compare to the region. When it is so low, how much more can it drop comparatively.

Property stocks got hit by lightning and falling from the sky. First indicator activated.

No la. Still a long way to go. Stocks are just a reflection of investors' confidence in the property sector on a short term outlook. Stocks can go down today and go up 3 months later. But it is an indicator cause you can't see prop stocks going up while the prop market is bad, both are correlated directly proportional.

Normally property is the last asset that people will dispose of in a bad financial situation. Everyone wants to own a piece of that pie. This idea is rooted deeply inside everybody's mind, especially Chinese.

Prop stocks are the first indicator, and there are many indicators to check before you actually see prices dropping. As of now, people still dancing, dining and buying like before, means the economy is still good, it won't affect property prices any time soon.

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Added on July 19, 2011, 2:34 pmThis is true in the US. Dow sell down actually contribute to the property bubble bursting in 2008. Lehman Brothers

In US, people can use stocks holdings' value as a collateral to borrow money from banks. Due to property boom, many actually borrow through this way to buy property. So when the Dow drops due to Lehman, the collateral value of the loan drops, so banks ask for more collateral in cash or in assets. Many are forced to either sell their stocks or their properties to protect their positions. The chain effect started and the rest is history.......

This post has been edited by lch78: Jul 19 2011, 02:34 PM

Thank you for clearing up the misconception.

So the fundamentals are intact. However another round of interest rate hike is around the corner, that might change things.

For reading:

http://www.btimes.com.my/Current_News/BTIM...rup060/Article/

http://www.bloomberg.com/news/2011-07-15/r...t-concerns.html

http://www.btimes.com.my/Current_News/BTIM...icle/index_html

http://biz.thestar.com.my/news/story.asp?f...71&sec=business

Note: thestar and NST title is dubiously phrased in such a way that gives you the perception that inflation has peaked, so no need to worry anymore. Then the contents actually talked about the inflationary pressure still there and need to be contained by another round of interest rate hike.

Despite the prediction that inflation has peaked in June, but the fact is, it has not. If we are to look at how the Government calculate inflation rate, the bulk of that weightage is hinged on petrol prices. We all know the petrol price is subsidized, artificial in another word. Therefore any small hike in petrol prices will move the inflation rate higher by a large margin. We all know by heart the Government can't hold this petrol price for long...... Somewhere need to give in to the global economic changes...

This post has been edited by lch78: Jul 20 2011, 12:38 AM

Not so bad la. M'sia is stuck now at current level, cannot move up or move down. Another 15 years maybe Vietnam moves up to Malaysia level now..

Short term impact. More or less of my expectation. The reason being that Msia property market is supported by REAL demand. The majority of Msia population just entering buying property age.

The reason speculators can fester are due to there are huge demands for property still.

Actually I think it is good to calculate based on net pay, for the actual buyers and to the stability of the property market in the long run. Some buyers tend to over-stretch their limit based on gross pay which cause problems later on.

Pigeon hole apartment got its benefits as well, at least it is easier to maintain.

Hot $$ can only jump to stock market and million++ properties. It won't jump to a few 100K properties.

IMO, majority of Asia countries property goes up is more due to inflation affecting the cost of building. The cost of building is mostly consisted of 3 major things, cement, steel and labour (maybe petrol also). Only cement is locally source, the other 2 are imported.

Ok, hot $$ might have contribute to inflation. But IMO the effect of hot $$ inflation is more negative to properties value. Why? Because hot $$ tends to generate more money supply into the population, so people have more cash to spend causing essential goods prices to rise, BNM then force to increase interest rate to counter inflation, thus causing people to have less desirable to buy property.

You just nail it in the coffin. When corruption is rampant, it is a sign of downfall of any governments, past or present.

I happened to be at HK on July 1st, which is HK handover to China holiday. There was mass protest ala Bersih2.0 (protesters got permit to rally) on that day. HK ppl mostly protesting about high property prices that goes beyond the affordability level of majority want-to-be house buyers.

What happens in HK property is a catch-22 situation. If HK government lowers the prop prices, house owners won't be happy, and if continue with high prop price policy, want-to-buy house ppl won't be happy. Last time Tung Chee Hwa tries to change HK policy of maintaining high property prices and he got ousted in the end.

HK actually has twice as much land than Singapore, but most land is controlled by the government. I think HK only developed around 10% of their total land area. It is HK government policy to create high land value, thus translate to high property prices, since the days of the British rule.

The land cost for building an apartment building in HK is around 60% of the total cost, whilst in Msia, the max is only 30%. It is actually the high land cost that causing the high property prices in HK.

Therefore now HK ppl are pressuring their Government to release more land for building houses, in order to bring down house prices. Right now, HK government also mulling having a social housing scheme like HDB in order to cool down their over-heated property prices. However, the HK leader is hesitating to think about how not to end up like Tung Chee Hwa shall he proceeds with such plan.

But then it is difficult for HK to lower their house prices in a free market. Every millionaires in China will like to own a piece of prop there given HK is still a better place for living (if you can afford it). And millionaires in China can easily out-number HK population.

BNM will got no choice but to increase interest rate. The leverage by using currency appreciation to contain inflation has already reached its limit. Further appreciation without other countries following suit will only hurt exporters.

http://biz.thestar.com.my/news/story.asp?f...46&sec=business

KLCC area condos only 10% occupied. So poor..

http://www.themalaysianinsider.com/busines...patch-says-dtz/

Just back from 'yam cha' (drink tea) with two friends. Found out that one of them just bought a 2nd prop and another just bought a 3rd prop around Klang Valley.

Looks like the market momentum is still good going forward...

They are stretching, but it is not over-stretch yet as both are high income earners. The props they bought is service-apt type. No need to succumb to LTV70 rule.

I don't know for sure. Let's just say they still can continue living their lifestyle even after the purchase.


Unless money supply drops drastically next year, otherwise the market will still be flushed with liquidity. As long as there is still a large amount of cash floating in the market, many people, like your friend will continue to dabble in risks. Banks need to loan out the cash, risk takers will borrow and dabble in stocks, properties, etc. The recent SRR increase doesn't really affect banks hoarding of cash. M-3 supply has grown another RM106B from July last year till May this year.

I really don't see how property market will crash in the short to mid term as long as the money keeps rolling in (thanks to US anyway for their quantitative easing).

Moderation of property prices in the short term maybe, as no. of barriers increase for property buyer. Many ppl will pause to see see look look what is the next development. Then after awhile, ppl will think "What is my money doing in the banks earning less than the inflation rate?" And then the property price graph start to continue upwards movement...

Of course, I am not saying a crash won't happen, it is just that I don't see the signs yet.

Something for reading, which is a good piece from BNM:

 bnm_eng.pdf ( 1.67mb ) Number of downloads: 79