1997 was not about RE bubble, I suffered and came through during that time, I knew it was not RE bubble that causing the crisis.

---

Added on January 20, 2012, 4:25 pm1997 Asian crisis is not as same as 2008 subprime or RE bubble.

---

Added on January 20, 2012, 4:29 pm

LOL, Thailand RE bubble causing Asian financial crisis?

This post has been edited by cherroy: Jan 20 2012, 04:29 PM

The moment people talk about property price is going to be corrected, or go down. Here may come QE3...

If QE3 is full blown in massive, we may see another round of inflation......
House price crashed in inflation threat situation? Can ar?

You are asking for a crystal ball......

It is pointless to ask such question.

Property price trend move depended on various condition, economy, financial situation, interest rate, property market itself etc, which is constantly evolving and changing from time to time and no one will know how it will be unfolding.

Previously few years of properties surge has showed, rental rate did not catch up with the pace of higher prop price.

Somehow, higher prop price may not necessary push up rental rate much, in fact, a lot of time send the yield even lower only.

For real eg.
A properties that worth 500k 4 years ago, rental is about RM2.5k.
Now it worth roughly 850k, rental is about RM2.8~Rm3k. Rm3.5k also hard to get.

If the plan is from 10% of wages, like reduction in EPF, the main group being "crushed" may come from middle to low income people only.
Wealthy one may not being affected at all.
Unless it is done through tax system, if not, wealthy one may a lot of way not to pay a single cent contribution to the 1care.
As we don't know how the plan will be carried out, so I don't want to jump into any conclusion.

But for simple illustration.

For eg. a millionaire that work as shareholder/CEO of the company, he may choose to earn RM1 from the company as annual wages.
So if 1 care is done through 10% from the wages, he just paid RM0.10 pa.
While company make millions of profit and company declare millions of dividend which eventually the millionaire get million income from dividend.

So if like that, the wealthy, high income earners may not affected, unless it is done through tax system.
If it is done through tax system, then it is considered another form additional tax hike already, which can kill the competitiveness of trying to encourage FDI.

Reduction from wages is a big flaw to start with.
The system should be trying to seek for the wealthy to pay more and less wealthy to pay less to have a equilibrium for social welfare.

If the middle class being crushed hard due to 10%, the likely outcome can be middle class demanded payrise from employers or being bounded by employers, by then employers being forced to raise the goods prices, eventually, inflation around.
With inflation around, properties price has even firm footing than before.

The "big jump" effect is more on political front instead of property purchasing power.
Wealthy/affordability people won't stop buying because middle class people being crushed 10% or less income or goods price increase make them less affordable.
Inflation actually, make the property cheaper and more affordable if the property price doesn't rise.

Go down or not, I don't know.

But inflation pressure is everywhere.

Oil price now near USD110.
Civil servant may get payrise which can be range from RM700 to Rm2500 payrise.
http://www.bernama.com/bernama/v6/newsgeneral.php?id=647367
http://thestar.com.my/news/story.asp?file=...2199&sec=nation


Cheap interest rate around the globe, even locally, the OPR at 3% seems peak, and many predict BNM may cut rate in the near future.
China start to relax the SRR.

All are favourable to inflation.
I don't see how an inflation threat environment can prompt a property market crash, or severe price down.

Company profit generally rise in tandem with inflation.

Last time, company make hundred million is considered huge, now we are talking with billions.
When company profit grow, so does employee wages (yes I know it is not proportional, but it did grow).
We see payrise in most company annually mostly.

Some company and business did have 50-100% grow in profit level, if compared to 5-6 years ago, particularly banking, commodities related.
One can ask how much banking industry is giving out bonus this year.

Last time, people earn 2k is considered very good, now we are talking about people work in MNC that earns 5k, 8k, 10k or even more.
Even civil servant now pay is way better off than 20 years ago. Civil servant wages level even surpass private sector now.

Inflation threat means drive people with money to go for hard asset to protect the wealth, so it provide certain support to the property price.
After all, with inflation across goods and materials, developers cannot build too cheap house or build a house at a loss, eventually no new supply at certain price figure.
No new supply means a supporting factor for property already.
Yes, high end one may be a different ball game, but we see some floor being put in in low to mid cost property with inflation on goods and materials, or even wages.

This is about new loan approval rate, the loan still growing, household debt show no sign of dropping even with lower new loan coming out. (This do worry a bit that's why BNM starting to imposing more strictly loan requirement).
Lower approved new loan just means new loan is less than before, there are still new loan made. Money supply still growing.
Look at banks financial report, most banks reported new loan growth about 8-12%.

If household is burden with huge debt, and even bank want to lend, but cannot qualify, it doesn't means credit bubble will burst.
In fact, it is a good thing the household cannot get a new loan.
The result, the household need to tighten the belt, and pay hard for the loan repayment. In this way, it will deflate the bubble, not bursting the bubble.
The bubble bursting can occur when household debt even at 70-80%, continue can get easy loan, and way beyond the income ability, then for sure, this will lead to the path of bubble bursting, just like subprime mess.

Gold is never or can replace current modern world finance market, and the world has not enough gold to be used upon, banking system cannot co-exist with gold as medium, world trade cannot function properly with gold as medium.

Fiat currency exist way beyond 42 years. Only USD was gold backed once in a period of time, none of other currency being gold backed since their existence. So fiat currency survived for 42 years is a false statement to start with.
RM or many many more currency (in fact across) is not gold backed either and even RM has short period of existence, it has exist for more than 50 years. Where is the claim of fiat currency exist only 42 years? It is fiat across.
Last time world economy is small and most countries in the world is under-devloped and availability of gold is abundant as compared to circulating currency, now not the same situation.
Gold backed is not viable option, be it quantity wise or co-exist with modern financial market functioning method.

Imagine go to bank, ask for home loan to buy a house, bank said to you, not enough gold to lend you, need to dig out more gold first, before they can lend you.
or
Cannot give you FD interest, need to wait the gold to dig out first.

Loading of physical as much as one could? Great.
The major risk - theft and rob. Once happened, all finished.

Central bank hold US treasuries as reserves because you trade with US, and get USD, in return, the USD has nowhere to store, better buy treasuries that can at least yield you some money.

Any currency is not backed by USD, this is false statement as well.
We have been using Fiat money even longer period of time.
Fiat currency is backed by confidence of public.

Money is just a tool of medium of exchange, so does gold. It doesn't have a value. Money or gold just a medium everyone agree as exchange of goods medium.
The modern world system is not hitting the wall, 2008 crisis has been the history.

Stop spreading false statement around that USD is backed by petroleum as well. If one said USD is backed by it is the largest of world economy, and superpower nation be it in term of financial, economy or military, then at least sound a bit logic.

Remember the banking story I posted, banks cannot co-exist with gold standard. Banks need to close shop, nobody can get a loan, developers cannot build more house, resulted, no job, no inflation. Ya, good. You may be too young to know, that prior before 70-80's before Malaysia economy booming time, you need to beg employers to have a job, many people jobless, those having a job seem a luxury and fortunate already.
No inflation come at a cost, also in this period of time, we had 2 WWI and WWII, that population died, economy being damaged due to war etc.
From 1900-1970, and 1970-2012, the change of world economy, tech, society, welfare is so enormous in the last 40 years compared to previous period. In fact, the last 40 years change has way more significant than 400 or 1000 years in human kind history.

Gold standard, yes can be adopted but may come at a price of deflation, jobless (banks and developers, car manufacturers are first few gone, then domino effect come afterwards).

---

Added on March 3, 2012, 11:20 amI think someone bought too much gold already, wish gold being used to back the currency, so that gold price can shoot to USD10,000 per ounce.

ok, stop on those non-related to property.


This post has been edited by cherroy: Mar 3 2012, 11:39 AM

So,
while one read those "entertaining" petrol dollar article, economy collapse, property sector is heading to crash articles etc,
in reality properties price continue to climb, or stubbornly high, stock market continue to surge, people are enjoying profit from properties and stock market, while one only feel syiok reading those article, think economy is collapsing without any single penny being made, while other are busy reaping profit, counting money.

No offence.

With civil servant payrise, and potential min wages adopted, GST, 1care which had not yet implemented, everything is pointing to inflation threat.
Whether current property is in the bubble or not, I don't know, but I know inflation can deflate the bubble naturally, without causing big crash in property.
When inflation hit, everyone want to hold on their hard asset.
When inflation hit, previous 800k house seems a bubble, inflation can make it become reasonable (as inflation means everything rise from goods to wages across).

I would worry more about inflation, instead of property market crash.

Own stay doesn't need to wait for crash one, anytime is a good time as long as one loves to have the property and afford to have.
Afford to have, like it, buy.

We have another fortune teller here.
Property Tsunami in the next 6 month? I heard this 2009, 2010, 2011, now 2012. Get bored already.

Even one get it correct one day (for sure, one day somebody will hit it) when property price drop time, so?.
Can a prime location property that 5 years ago that was 500k and now 850K, drop back to 500k?

With inflation, the wealthy one may eager for hard asset to invest to protect against inflation, property is one of hard asset.

Yes, transaction may be quiet down, but it doesn't mean price will plunge significantly.
It may due to fire-sale in initial stage especially those speculators and high leverage one, but with inflation factor, there is a limit how far a property price can plunge especially for prime location.
You will see "nobody want property" instead of price plunge too far in this kind of scenario.

Only poor one, makan also tak cukup suffer, but when makan tak cukup, there is pressure for wages increment across, so inflation factor coming in again.
Unless the consequence is recession happening, but if recession happening, inflation will be tamed down by recession factor.
So there are 2 opposite force acting one another.

Money will become more, not less if one understands how financial market work or economy works.
That's why rich become richer.

There are many cash rich people around as well as cash rich company.
Those rich bought those property are not for home, but as investment or park their excess money instead put cash in banks which earn zero interest (most countries ).

Yes I do agree, oversupply condition can occur, which could lead to price stalling or falling afterwards due to fire-sale, but properties nowadays, no longer bought as home already, but as investment.
As long as there are money that willing to invest in property, after sometimes properties situation become normal back after correction.

I know SME/SMI are facing difficult challenge ahead, but undeniable, many SMI/SME are more well prepared in their balance sheet in current situation.
Situation out there are not rosy, many run well below capacity across.
I never said situation is rosy, I just pointed out, situation is not as bad that property must crash across.

As you mentioned, many are preparing for cashflow problem, means that many company are well prepared.
Market crash generally occur when people are complacency and not well prepare for difficult time, classic eg. prior 2008 global crisis, prior 1997 crisis, many company hit hard due to debt cannot be refinanced, and run into trouble of cashflow.

For rich, properties not only for playing or for ROI, they do treat it as "another money parking option"

You already answered your own, in the middle

Properties price can be largely due to per capital income level as well.
The higher, the potential the property price can go.

Oil price did surge 100%, from USD40~50 during 2008, to now USD100.

By definition, gold also a tulip mania?

How much inflation for the last few year? 5% as mentioned.
Gold surged for more than 100% between 2008 to 2012.
No matter what asset class, this price move is not sustainable, just another tulip mania.

Now the Real price in the market is RM2.70.
Those cannot enjoy subsidy industries out there one are paying RM2.70 for industrial diesel.

Just because you/we are not paying (or yet) Rm2.70, don't take for granted the price is RM1.90 now.




This post has been edited by cherroy: Mar 22 2012, 11:48 AM