the liquidity squeeze is happening everywhere and fast. there is no way out except massive dosage of QE. more expansion or tapering, either way, we're doomed.

But never mind, remember the favorite mantra? property is the best hedge against inflation, supply is tight, demand is high and price is entering correction before surge again. Let's see what happen next 12 - 18 month to vindicate the mantras.


Liquidity collaspe in blueschip China corporation


Our govt bond also shown the similar trend as in US:

Must read. Good analysis by Sam Chee Kong. He is not bearish but just painting a true picture to us.

If you're buying when prices are peaked you're essentially locking in the highest commitment (monthly installment payment) for the next 30-35 years. If the market goes south, you've practically loss on equity as the value of your asset declines... (please also bear in mind... your commitment to the bank is still the same). Yes, the value of your house may return to the value that you purchased it in the future. But what does this all ultimately mean? It means that, if you enter at the highest price, your greatest loss is the opportunity that you would have if you entered at a lower price. This opportunity comes in the form of an earlier upgrade to a better house, basically more funds to do other things instead of just paying of installments.

I hope that helps to give you some clarity and especially a different POV to what others here may preach (i.e. anytime is a good time to buy, you need it, you can afford it, you buy)... I don't like paying for over priced items (i.e. priced way above its value)

Thanks for the infor.

Good article, I browsed the writer's blog and found another article that is especially relevant.

http://samcheekong.blogspot.com/2013/06/gu...rket-crash.html

It's a long article so I'll just quote the best parts here:

In his book "A Short History of Financial Euphoria", J. K. Galbraith looked at significant episodes of speculative boom-bust during the past 400 years, and came to one key conclusion which concerns us today. He found that speculative episodes start with something which grabs the financial world's imagination, driving up a single asset’s price or the price of an entire sector. There is high gain positive feedback - success breeds success, and then excess, always attracting new buyers. Speculation then moves towards the terminal phase, where it builds only on itself. The asset, or a whole sector - and today all major equity markets - simply grow without reason or logic.

Investors "jump on board". Those already on board and not only for their own personal benefit, talk up the cant-lose investment, further building the bubble. One interesting aside, all through Galbraith's book, is that financial regulations designed to protect investors were in his opinion almost certainly not able to markedly change a boom-bust phase, or protect investors.

As Galbraith notes many times in his book, the role of credit and debt, in a speculative bubble, has been either important or critical ever since the 17th century. As we know, debt itself can become a speculative asset, but the surprise is this asset - notably sovereign debt - has been a driver of massively euphoric market frenzy, followed by total wipeout, as far back as the 1720s.

Malaysian debt to GDP ratio is the highest it has ever been, at 83%, and out of the 83%, 55% is housing loans.

This post has been edited by lowyatter: Jul 10 2013, 09:49 AM

Re-sharing an old article... just so that people realize property prices do collapse, and yes, it can go down more than 20-50%. If it can happens to a nation with such a huge population and real scarcity of land like Japan, it can happens anywhere in the world.

http://www.nytimes.com/2005/12/25/business...wanted=all&_r=0

By MARTIN FACKLER
Published: December 25, 2005
KASHIWA, Japan

FOURTEEN years ago, Yoshihisa Nakashima looked at this sleepy suburb an hour and 20 minutes from downtown Tokyo and saw all the trappings of middle-class Japanese bliss: cherry-tree-lined roads, a cozy community where neighbors greeted one another in the morning and schools within easy walking distance for his two daughters.

So Mr. Nakashima, a Tokyo city government employee who was then 36, took out a loan for almost the entire $400,000 price of a cramped four-bedroom apartment. With property values rising at double-digit rates, he would easily earn back the loan and then some when he decided to sell.

Or so he thought. Not long after he bought the apartment, Japan's property market collapsed. Today, the apartment is worth half what he paid. He said he would like to move closer to the city but cannot: the sale price would not cover the $300,000 he still owes the bank.

With housing prices in the United States looking wobbly after years of spectacular gains, it may be helpful to look at the last major economy to have a real estate bubble pop: Japan. What Americans see may scare them, but they may also learn ways to ease the pain.

To be sure, there are several major differences between Japan in the 1980's and the United States today. One is the fact that property prices rose much faster and more steeply in Japan, partly because speculators used paper profits from a booming stock market to invest in property, insupportably leveraging the prices of both higher and higher.

Another difference is that the biggest speculators in Japan's frenzy were deep-pocketed corporations, and they pumped up the commercial property market at the same time that home prices were inflating.

Still, for anyone wondering why even the possibility of a housing bubble in the United States preoccupies so many economists, it is worth looking at how the property crash in Japan helped to flatten that economy, which is second only to that of the United States, and to keep it on the canvas for more than a decade.

And as American homeowners contemplate what might happen if their property values fell -particularly if they fell hard - there are lessons in the bitter experiences of their Japanese counterparts like Mr. Nakashima.

JAPAN suffered one of the biggest property market collapses in modern history. At the market's peak in 1991, all the land in Japan, a country the size of California, was worth about $18 trillion, or almost four times the value of all property in the United States at the time.

Then came the crashes in both stocks and property, after the Japanese central bank moved too aggressively to raise interest rates. Both markets spiraled downward as investors sold stocks to cover losses in the land market, and vice versa, plunging prices into a 14-year trough, from which they are only now starting to recover.

Now the land in Japan is worth less than half its 1991 peak, while property in the United States has more than tripled in value, to about $17 trillion.

Homeowners were among the biggest victims of the Japanese real estate bubble. In Japan's six largest cities, residential prices dropped 64 percent from 1991 to last year. By most estimates, millions of homebuyers took substantial losses on the largest purchase of their lives

*** read more from the link***

Hmmm........ As far as I can remember.... The last 8-10 yrs (or it could be more) every yr is also peak price..... So if I'm going to or shld avoid the highest price like some ppl always like to advise, I think I still own nothing till now.....

This post has been edited by AppreciativeMan: Jul 10 2013, 10:08 AM

Property will collapse when most of the holders over react such as share market when everyone start panic n throw below market prices due to the bad market sentiments. For me, new policies from government recently are just their intention to reduce bad debt & collect back more money from the bankers/public since they consumed lots of the country reserve during the last election. I do not see property prices downtrend in short term.

I think I still own nothing till now.....

--------------------------

sorry, you paid cash? if not, it is the bank who owns it ... until you settle the balance!

It is a double swords. Rate trend is clearly heading north now.

This article always always come up from DDD campers...and I will always always highlight this part on the article..

In the 1980's, Professor Noguchi said, the frenzy in Japan reached such extremes that companies tried to outbid one another even for land of little or no use. At the peak, an empty three-square-meter parcel (about 32 square feet) in a corner of the Ginza shopping district in Tokyo sold for $600,000, even though it was too small to build on.

Now if a 32 square feet apartment in Malaysia is worth USD600,000!! then we can panic, currently we are not. I will always say that we are not the same as these countries over and over again..

Do you guys know there are no secondary car market in Japan? Becasue they have this mandatory 10 year scrap thing for cars..and why are we comparing with Japan again?

Let us compare how cheap is the car in Japan and how expensive cars in Malaysia, and why do people on Malaysia still buy super expensive cars? Psychology of people purchasing behaviour is important too. Did any of you guys take marketing as a subject? Well that is what they teach in marketing class.

Japan, US and Malaysia are seriously not the same.

This post has been edited by AmayaBumibuyer: Jul 10 2013, 11:12 AM

I could not disagree as all points are valid

Notice you also have 4 "ifs" in your comment So a lot of uncertainties are involved in property investment. At the end of the day, it is personal judgement and 眼光

Hope one is debt free for the right reason. You dont want to be debt free for the very wrong reason.

This post has been edited by CloudAtla$: Jul 10 2013, 11:38 AM

"One major unifying factor is that both groups (in UUUUU Camp) do not have a coherent explanation for why the asset price, the sector or a whole market is "defying gravity". They will resort to a range of fragile explanations which become ever-less credible to any unbiased external observer, as the crash approaches."

From the blog posted above. Fully agree.

3 "ifs" relate the the action of the person... only 1 "if" is in relation to the market... the most important... end of the day you just have to understand both sides of the coin before making your decision... just giving a different POV cos I can see many here always say "anytime is a good time to buy"... which is just one side, and I offer the other.

It doesn't matter how many you picked up yesterday, last year, or in the past 8 - 10 years... .the most important thing is ... NET WEALTH.. no point picking 5 properties and drown in debt... I don't see any sense in that.



This post has been edited by Rooney1985: Jul 10 2013, 12:10 PM

Well said. Wise words from a wiseman.

Friend, you have to look at that price in relative to the circumstances at that point in time. On hindsight, it looked super dumb. But caught in the frenzy that time, the buyer of that land must have thought it was the right decision and pricing.

Same as here and now. RM800-1000 psf is becoming the 'norm', and people dont 'feel' it's excessive. But once we take off the rose-tinted glasses, it means RM500k for a 500sf studio, or RM1mil for a 1000sf condo. I repeat, RM1mil for a 1000 sf condo. Match that to the average income of Malaysian.. RM5000 per HOUSEHOLD. And you will see how 'unaffordable' our mass housing really is to the general public.

Well, I am not sure if marketing classes teach the basic Ps anymore.. but anyone who know anything about marketing will know one of the most important Ps is Pricing.

The article already mentioned the possible reactions to this kind of news..
THE BIGGEST LESSON IS NOT TO FALL INTO A STATE OF DENIAL

"Most of all, economists say, Japan's experience teaches the need to be skeptical of that fundamental myth behind all asset bubbles: that prices will keep rising forever. Like their United States counterparts today, too many Japanese homebuyers overextended their debt, buying property that cost more than they could rationally afford because they assumed that values would only rise. When prices dropped, many buyers were financially battered or even wiped out.

"The biggest lesson from Japan is not to fall into the same state of denial that existed here," said Yukio Noguchi, a finance professor at Waseda University in Tokyo who is perhaps the leading authority on the Japanese bubble.

During a bubble, people don't believe that prices will fall," he said. "This has been proven wrong so many times in the past. But there's something in human nature that makes us unable to learn from history."

Well, I am not comparing to Japan. It would be not be exactly the same circumstances, triggers or impacts. But there are many economy and financial ratios similarities, which many other posted here.
After the Japanese bubble popped, the Americans too thought it wont happen to them. US not same as Japan.
After the America, the Irish said it wont happen to them. Ireland diffent from America.
Then UK, Spain, Vietname etc.


This post has been edited by cockee: Jul 10 2013, 12:18 PM

Penang and KL are reaching ridiculous levels already.

The latest project next to E&O Hotel in Penang, called Shorefront is RM1500 /sqft.

This post has been edited by lowyatter: Jul 10 2013, 12:24 PM

It depend on how to see it.
He/she are burning RM2k/mth on rental. In a year, that 24k, around 5% of RM480k of the property intend to purchase.
Should the properties market drop 5%, he still get nothing. But if price stagnant, every year burns 24k wor
Price up lagi jialat
If price up/correction at 20% either end, I think no eye see jor

With loan interest rate at very good packages and he manage to find home sweet home with no problem servicing the loan. I would said, go for it.
We can afford to make a mistake on first home purchase cause normally we can outlive the price correction

Just my 2 cents opinion.

This I agreed fully
Can sleep better at night without worry income drop lar, interest up lar, cannot rent out lar and others