I have friend who also hopes everyday for the past several years for the home price in Penang to come down. In the end, he bought a property in Alor Setar for RM200K which has a appreciation to about RM280K after a few years.
Instead of betting solely on home prices to come down, you should have plan B, C and D. Example, If the homes in KL are too expensive, maybe you should consider investing in a property further away, not to stay but as an investment. In KL, rent a place as a home. Your investment property will appreciate (or for rental) and maybe in the future, you can sell it to fund your dream home in KL.

May I know when did your friend bought his/her property?

Dun let yr cash sitting unproductive. (FD Rate < Inflation Rate)

About 3 years ago, a single storey semi D.

People are getting richer these days.

The average monthly income of Malaysian families rose to RM5,000 in 2012 from just RM4,025 in 2009, according to the latest Household Income Survey.

At the same time, the average monthly income of families living in urban areas rose to RM5,742 from RM4,705 in 2009, while the take home pay of their rural counterparts climbed to RM3,080 from RM2,545 previously.

“The significant income rise was achieved with the federal government’s efforts in ensuring continuous, stable and strong growth in the economy,” said Minister in the Prime Minister’s Department Tan Sri Nor Mohamed Yakcop.

“The impact was via widespread increase in economic opportunities which generated employment with business and industrial development in various economic sectors.”

Moreover, all states posted higher monthly incomes, with Kuala Lumpur clinching the highest growth rate of 14.9 percent (RM5,488 to RM8,586), followed by Labuan’s 12 percent (RM4,407 to RM6,317).

Monthly household income in Perlis rose 10.1 percent (RM2,617 to RM3,538) and 9.1 percent for Terengganu (RM2,617 to RM3,538). Negeri Sembilan’s figure climbed from RM3,540 to RM4,576, while Sabah’s monthly take home pay rose to RM4,013 from RM3,102 previously.

On an ethnic basis, Indians saw the largest increase at nine percent from RM3,999 to RM5,233, closely followed by Chinese at eight percent (RM5,011 to RM6,366), while the average monthly household income of Bumiputeras rose 6.9 percent (RM3,624 to RM4,457).

I agree, and I disagree I use some numbers so that it is easier to understand

1. If a person with nett income of RM10k pm, and assuming the bank's approved debt to income ratio of 50%, then he can borrow loan(s) with installment up to RM5k pm. That translates to loan(s) of roughly RM1 mil.

2. We have a misconception that flippers/speculators can buy unlimited number of properties, which causes the market to expand into a bubble. But if flippers need to leverage, then he can buy only up to RM1m worth of properties

3. Banks approve loans based on the nett income you are already earning, not future income from expected rental / capital gain on flipping etc


Scenario 1
In 2014-16, flipper/speculator's units VPed. They manage to rent out / sell. Then, all is well for them (not so well for the DDD)

Scenario 2
In 2014-16, flipper/speculator's units VPed. They can't rent out / sell. But he still can afford to service the installment. Because banks approve the loans based on his affordability. This is what many termed it as "holding power"


IMHO, the determinant of market will crash or not does not depend on the number of projects going to VPed in 2014-16 (or any period). The banks need to vet through the loan applications and make sure the buyer can afford. Especially BNM's rule tightening measures of using nett income and 70% LTV rules

This holds true PROVIDED if the country/world economic condition remain unchanged (ie. job still intact, rental market healthy, or interest rate unchanged etc ). In other words, the buyer's "holding power" is not affected. In the event that Malaysia faces recession (lose jobs, hard to rent out, interest rate increase etc), then the scenario becomes totally different. Just imagine a 2% interest rate increase on a RM1 mil loan will be translated to an increase of RM1k installment pm. For those who borrow to the max, that is strenuous to the cashflow. And eventually start off the "bursting of bubble"

treasury website with info updated until 4Q 12. For those who like numbers and statistics only.
NAPIC 4Q data should be published very soon as well.

http://www.treasury.gov.my/pdf/ekonomi/sukutahun4_2012.pdf

The holding power is weaken, 20% increase auction unit in 2012 woh. More and more auction are range at 500k above woh. Bank loan approval system is not bullet proof.

If you want to look at auctions, then it may be more meaningful to look at Non Performing Loan. Overall, BNM reported NPL is just 1.5%. And that is for total household debt. Most NPL is car and credit card loans. Not property loan.

http://www.kinibiz.com/story/corporate/101...ebt-levels.html


% sometimes is misleading. If you have 1000 auction is 2011, and 1200 auctions in 2012, that is 20% increase. Looks alarming ?

But if the total property is 1,000,000, the 1200 case is just 0.12%

Just curious, can give an example or two how to circumvent the banks rules so I can borrow more ? Take the example my nett income is RM10k pm, and I have already servicing RM5k installment now ? How to borrow more loans ?

Oh goody...hope you are right...then I can pick up some nice juicy props from despo flippers later...

My (financial) body is ready....

Actually, you can buy anytime, so long there is someone selling below market value....

Aiyah....election propaganda lah.....

You are assuming that the bank take into the flipper's other expenses which may be higher than the average Joe's...

Kids education and others....

What if many flippers don't really have the extra 5k to service but just gambling on a quick profitable sale....?

Thanks. Outstanding loan chart does not look pretty.
Any clue if there is one available with a longer timeline?

You are also assuming they have other expenses

Anyway, if the time come, the flippers will cut down on "other expenses" rather than going into bankruptcy

If they can.

Can they for example cut down their kid's education, food and other necessity to keep holding unto their props.

Some expenses are more important than others, and I doubt holding on props that they can't unload is in their top 5.

And also flippers are usually risk takers really. They will have other debts which they will need to service as well, and if they don't service, banks will take action against them and may trigger bankruptcy which in turn trigger foreclosures on their investments that they could not flip.

In my definition,
Risktaker - a person who knows his risk level, knows the consequence when things against him/her. In most risk taker I kno and seen (including businessman/businesswoman), they are prepare to go into bankruptcy in worst scenario. And in many case, they still can live their life as normal because they'll hav channel another funds out of their name as backup funds.
For those who are not prepare for downturn, they are call - Naive.
Flippers are majorly risk taker, who knows where is their risk and they took it.
Please don't assume most ppl do not kno how to calculate risk. U don't need a Degree to calculate risk, u jus need to kno simple mathematic calculation .

This post has been edited by AppreciativeMan: Mar 29 2013, 09:52 AM

Very gd example and of cos QUESTION!!!

And what do you call the risk takers that calculated wrongly despite taking all precautions?

What can be more wrong if they are already prepared for the worst?

This post has been edited by AppreciativeMan: Mar 29 2013, 10:54 AM