I agree with you that our banks are far more cautious compared to the Americans prior to '08.

But remember also that the vast majority of our countrymen earns why less per income per capita compared to the Americans, and the personal debt levels of Malaysians are also not low.

yes, agree with you on the cycles... there will be ups and downs and generally on the long term, it should be uptrend...even if it means earning 2-3% capital appreciation per annum... i am just simply quoting example of a low gain...

bear in mind that we will have population increasing as well and between now and 2016, there will be new fresh grads joining the employment market and then we will have new buyers and first time buyers as well...

so it is not like the supply will keep on increasing by a big quantity, where else for demand, you will have a stagnant number of a pool of buyers only...

I don't notice this trend in Puchong and Kinrara. You have any examples?

So:

a) How many investor has such deep pockets?
b) Condos now are much more expensive than 6 years ago
c) Will an "investor" eat such a huge loss (buy at a high price approaching RM1M and then see his investment produce 0 return for years while still paying to the bank)?

If you can see that a condo 6 years ago is lying vacant until today, why would you still be rushing to buy? Clearly demand has far outstripped supply.

Hi guys,

I'm doing a survey. I know many people have open up the same kind of thread but I figure that one is already out of date. Please vote on the latest one:

http://forum.lowyat.net/topic/2740217

In my experience, the so called deep pocket investor is rarely seen, seldom heard from when the economy is fine. When a recession or property slump hits, a lot of hidden issues suddenly become evident. Example:
Mr Deep Pocket has borrowed heavily from many financial institutions
His other leveraged property investments also suffer sharp price falls
He cannot liquidate his investments quickly enough in a slumping market to avoid sharp losses
His rental income falls off a cliff as tenants cannot pay rents or disappear altogether

Mr Deep Pocket suddenly becomes Mr Sleepless Nights in a recessive economy. Business creditors are after him for long outstanding bills. His business is starved of cash flow and employees are leaving. Banks threaten to foreclose his delinquent loans. Credit is tight and interest rates are exorbitant.

Of course, the above is purely imaginary. However, just ask an experienced businessman how he fared in those recessionary years 1986/7 and 1997/8. Things have been relatively good the last dozen or so years. However, when it next rains, it really is going to pour. The signs for the property market to correct sharply are all there.

US average home prices increased 70% - 75% over a period of 4 fours (starting 2002/03) and peaking at 2006/07 before the bubble burst. Within 1 to 2 years (2008-09), the prices returned to what they were in 2002!!! And they're still hovering around the same range now (2012/2013)!!!

Questions to think about...
1. When did props here start sky rocketing?
2. Whats the increase in percentage terms?
3. Is the period in Q1 and percentage in Q2 similar/ worst/ better?

Happy pondering...

This post has been edited by Rooney1985: Mar 18 2013, 12:07 PM

http://www.propertyguru.com.sg/property-ma...in-2013-analyst

Isnt this the same scenario in other countries as well? So why then did property markets collapse there then? In my opinion, u can have an increasing population number but affordability is based on income levels which in Malaysia is a growing disparity.

A good read:

http://www.kinibiz.com/story/finance/9482/...-east-asia.html



This post has been edited by cybermaster98: Mar 18 2013, 01:14 PM

Below is a recent article in the Straits Times Singapore on how easy borrowing has fueled debt levels beyond the Asian 1997 crisis level in Asia. Somewhat lengthy but good analysis and read.

Asia is lending itself to higher debt risks Link To Article Here
Fiona Chan The Straits Times
Publication Date : 12-03-2013

As the United States and Europe fret over their huge government debts, a different kind of debt worry is surfacing in Asia.

Analysts are flagging the rise of lending levels in the region, such as bank loans and corporate bonds, as a growing concern.

Stable growth, strong bank deposits and global low interest rates are fuelling what is seen as a potentially risky appetite for lending among banks on the one hand, and for debt among individuals and companies on the other.

Borrowings as a proportion of the overall economy in Asia apart from Japan have already shot past the peak that prefaced the Asian financial crisis, suggesting that debt levels have risen relative to the ability to service them.

The risk of a country's growing dependence on such debt is that it becomes more vulnerable to economic and financial shocks. An economy with higher leverage is likely to see more business failures and loan defaults in a recession or if interest rates rise sharply, all else being equal.

Bank loans as a proportion of gross domestic product (GDP) have reached an all-time high in Asia excluding Japan, surpassing the peak prior to the 1997 Asian financial crisis, said HSBC economist Frederic Neumann.

That is troubling because a poorly supervised lending boom in Asia had contributed to the 1997 crisis, by making the region's banking sector more exposed to the subsequent plunges in asset and currency values.

Including bonds - a rarity in the 1990s but having sold in record levels in recent years - the measure of debt would be even higher, Neumann added.

This is worrying as the rise in credit is outpacing the growth in economic output, he said. "In short, more and more debt is needed to generate one percentage point of GDP growth."

To restore balance, Asia's economies need to keep stepping up productivity, Neumann said. In the meantime, as long as loose monetary conditions in the developed economies continue to spur global funding and keep borrowing costs low, the region's leverage is likely to grow even more this year, he added.

Outpacing the region

Within Asia, Singapore is one of the countries seeing both higher levels of and faster growth in private sector lending.

In terms of average debt to GDP, Singapore comes second after China among major emerging Asia economies, said Goldman Sachs analyst José Ursúa in a recent note.

China's credit was 127 per cent of GDP last year, on average, while Singapore's was 115 per cent, he said. Malaysia and Thailand logged debt of about 110 per cent of GDP on average last year.

South Korea's ratio was 99 per cent, India's was 51 per cent and that of the Philippines and Indonesia was around 30 per cent.

In response to queries from The Straits Times, the Monetary Authority of Singapore (MAS) said that as of the fourth quarter last year, Singapore's private sector domestic debt-to-GDP ratio was 118 per cent.

Not only are Singapore's absolute lending levels high, but they have been growing faster recently than most of its neighbours'.

Among Asian countries, Singapore and Thailand have seen the steepest year-on-year rises in their bank credit to GDP ratios over the last two years, according to Johanna Chua, Asia-Pacific chief economist for Citi.

Homing in on debt worries

In Singapore, concern over credit levels has mainly manifested in worries over property debt.

DBS economist Irvin Seah notes that mortgage loans are at an all-time high, as a proportion of both the overall economy and of total deposits.

"The property market is the new safe deposit box for Singaporeans," he said. "This implies rising risk exposure of the banking system and of the entire economy to the property market."

According to the MAS' latest financial stability review, property-related exposure made up 46 per cent of domestic loans extended to non-bank entities as of September last year.

But this was down from the average of 48 per cent since 2004, and the growth in such lending had moderated over the last year.

On a household level, the trends are more worrying. Household assets grew by 7.8 per cent year-on-year in the third quarter of last year, but household debt grew by a bigger 10.4 per cent, driven largely by housing loans.

This has led to Singapore's household debt to GDP ratio topping the eight Asian economies surveyed in the MAS' review as of September last year, including South Korea, Thailand, Indonesia, Taiwan, Hong Kong and China.

Should interest rates rise, buyers who have over-extended themselves on mortgage loans would be hit, especially since the "vast majority" of home loans in Singapore are based on floating-rate packages, the MAS said.

If mortgage rates go up by 4 percentage points, the mortgage-servicing ratio for the average household will increase by 13 percentage points, it added.

Take a person with a mortgage rate of 2 per cent, who is spending 30 per cent of his income on loan repayments. If his mortgage rate shot up to 6 per cent, he would then need to pay 43 per cent of his income to cover the increased payments, this indicates.

Worries over rising property- related indebtedness prompted the MAS to impose tighter home loan limits this year, including loan caps and higher cash downpayments on second or subsequent mortgages, and curbs on mortgage-servicing ratios for HDB flat loans.

Rumours have also surfaced that similar mortgage-servicing ratio limits are in the works for private home loans.

Early alarm

The good news - so far - is that while analysts are sounding an early alarm on the rise in debt, they do not think it has reached a dangerous point.

Chua noted that rapid credit growth and a higher- than-usual rise in debt to GDP "do not always lead to some form of systemic banking crisis".

But research shows that more often than not, credit booms are followed by an extended period of below-trend growth, she said.

"We think this potential for a subpar growth outcome is a risk factor we need to watch in Asia."

Standard and Poor's credit analyst Tan Kim Eng also noted that debt to GDP ratios may sometimes overstate financial risk.

In financial hubs such as Hong Kong and Singapore, many companies invest abroad using domestic loans, but the value created by their investments is not included in domestic GDP. That tends to overstate the debt to GDP ratio in these economies.

Total credit extended in the region to non-bank entities also remains lower than that in most parts of Europe, and Asian lenders have more diversified credit risk than their counterparts in Ireland and Spain, Tan added.

Still, he warns that a marked slowdown in economic growth in the region could expose current weaknesses associated with the recent ramp-up in debt growth.

If growth in China slows sharply before that in the developed economies pick up, Asia's economic activities will be adversely affected and loan defaults may start to rise, said Tan.

"More than before, continued economic and financial stability in the Asia-Pacific will require greater awareness of the risks," he said.

"Otherwise, we could find the credit crisis complete its global tour by revisiting the region."

a) you have not seen enough does not mean they are not there. This explain why more than 50% of MK condo completed in the past 2 years are vacant but you never see such units in the lelong market.
b) holding multiple bare units are no joke regardless the entry price, try hold one and see.
c) there is no loss as long as appreciation price > loan interest but most deep pocket bought without borrowing.

One thing for sure is the owner wanna cash out now.

Sorry but not everyone is interested in the PR1MA house.
At least I am not interested in it at all.

Ure refering to a different group of investors (which are a minority). The bigger group of investors are those who have squeezed their finances to purchase properties which were barely within their means all because of the recent hype about escalating prices and empty promises made by developers on future pricing.

These investors are also those who have not just stuck to 1 property purchase. Many of them actually have 2-3 properties each bought using DIBS schemes. What happens to these ppl when their properties do no appreciate much upon VP and rental options are limited. How long can they hold on paying monthly installments on properties which are not generating the projected income?

Unless you rent it out or sell it off, any profit or loss is really on paper.

If the owner still hasn't managed to flip it off in 6 years, he must either be really really stubborn or the price hasn't appreciated beyond his purchase price in 6 years. Quite difficult to understand really.

almost any property owner who bough his before 2008, is almost certain to make handsome profits selling it anytime from 2010 till now. No knowledge is needed. NONE. Even idiot can do it as long as he knows how to sign.

That's the best bubble sign.

what if the owner doesn't need to flip and bought the property for rental yield and keep for long term?
not necessary have to flip and sell in 6 years right?

i tried to read a book from Milan Doshi, one of the advice is buy and assume to keep like forever... i recall reading this statement...

Any statistic to support ur view?

That's the problem now, when government spoon feed something cheap, but people not interested.
Maybe the new launch by developer are too tempted, nice concept, nice facilities, nice showroom.

hmm... no need statistic...but what about real case example?

Bought in 2007, apartment A, cost about RM160k for example. Now selling price listed around RM300k ... assuming there is downturn and price drop 40% or 50%...it will be back to the original buying price. just continue to rent it out and the rental is enough to cover the loan repayment...

so those who bought earlier before the property 'boom'... i don't see any reason to worry about the crash... if they are not going for capital appreciation gain...

Haha! This's true, many still vacant incl new VP, VP 2-3 years ago, and the 6-8 years old one, but price stagnant and slowly up.
The fundamental of supply/demand doesn't applicable here