This report doesn't sound so convincing, RPT-Fitch revises Malaysia's outlook to negative; affirms IDRs at 'A-'/'A' ...

I was wondering if the weakening ringgit means that one should invest or stay invested in properties as a hedge for further inflation. Am my thinking right? Why should property investors sell their props and keep RM which is depreciating?

House prices at any point in time, like that of any other asset with a built in cycle, depends largely on irrational sentiment and emotion. Fundamentals only tell you what the price OUGHT TO BE, not what the price WILL BE at any given point in time. Fundamentals in the US were largely constant, but the price for certain houses fell as much as 70% during the crash, way below the cost price of the house, and way lower than the fundamentals would indicate. Sentiment is a fickle b*tch, both on the way up, and on the way down.

What we are seeing in Malaysia is a newfound positive public sentiment towards purchasing housing at the highest possible end of affordability, and this is encouraged by prolonged historically low interest rates and a sustained period of consistent outsized gains, which has led to, rightly or wrongly, a perception among many ordinary Malaysians of reduced/zero risk, guaranteed outsized returns and a fear of being priced out in the future. How many Malaysians who hold millions worth of property and mortgage debt are invested in other asset classes? So long as this sentiment lasts, many ordinary Malaysians will continue to bet their next 35 years of earnings on houses which they can barely afford, fundamentals be damned.

Again though, sentiment is fickle, and I think there is a relative lack of sophistication in the average Malaysian investor who tends to decide based on limited anecdotal experience instead of statistics and dispassionate macro analysis. Such investors are just as quickly inclined towards fear on the way down as they are to greed on the way up.

I have a theory that the mentality of those who disregard macro analysis is analagous to the mentality of those going to a casino, or those buying lottery tickets. Let me elaborate.

Statistical data and mathematical analysis necessarily lead to the conclusion that an average person who gambles at a casino is more likely to lose money than gain. Logically therefore, nobody in their right mind should go to a casino. However, there are necessarily people who have had personal experience winning money, and due to the logical fallacy called hasty generalisation, they will tell you that your theory is wrong based on their own limited experience. (i.e. I have won the last 5 times, and my friend has won the last 5 times, and his friend has won the last 5 times, and therefore I believe I will continue to win) There are those who read, understood and agree with your data will tell you that they are exceptionally skilled or lucky (i.e. I am different, I am special, your theory does not apply to me). Ultimately though, regardless of all the theorizing and discussion the casinos are still packed with very wealthy and educated people, and the casino owner laughs all the way to the bank.

Caveat: Macro analysis at the layman level at least will not help you predict the future, and any prediction made by experts with any degree of specificity is usually wrong. Asset markets are inherently unpredictable, and the rules of the game may change at any time with a simple announcement of a new government policy, whether here, China, the US or elsewhere. Nonetheless, my analysis leads me to the conclusion that based on current conditions, people, especially the overleveraged, should start diversifying away (not exiting completely of course) from the property market which is looking increasingly vulnerable.

Comparatively, landed property in Malaysia is more expensive than in the U.S, means higher standard living than the U.S       

Why do u think thats nt the case in Malaysia? There was once nt long ago, just couple of months before GE a couple of banks offered loan at 90% margin up to 50-70%% of my gross income... If I accepted the loan, I would definitely end up eating roti daily.. Luckily the deal fell through though... BNM have to play hardball on this matter n should constantly monitor these so called "controls".. 

I am afraid there will be more bankruptcy cases if the interest rate is increased, as I can observe that there has been irregularities in bank practices which allowed too many people to leverage on cheap credit and push it to the max.. The slightest increase could push them out of window n we need to bear in mind, it's easier to sell a car but nt a house..

House transaction takes a very long time, thus for someone to bail out within a short period of time is quite challenging.. Luckily not many lock-in type of loans anymore..

I was wondering if the weakening ringgit means that one should invest or stay invested in properties as a hedge for further inflation. Am my thinking right? Why should property investors sell their props and keep RM which is depreciating?

My 1.5 cents:
The weakening ringgit could be hedged through local property investment provided the property price does not weaken more than the currency.

In order for property not to be weaker than the currency, the cost of building has to be increased (due to weakenning currency) but in the same time the demand has to be high too -- this could also means purchase power of the target property buyers has to increase (although currency has weakend). Therefore, it is still very much depends on the local economy.

The fundamental is still demand Vs supply..... in a situation of weaken currency, would demand > or < than supply in the types of property we are investing?

Perhaps, if a person does not have much confidence on this "boleh-land", should consider holding international asset (property in other countries) Or stocks (unit trusts too) invest in other countries, precious metals (gold / silver) which is insulated from local currency issue, etc........

Other daigos -- do share your thoughts too on "how to preserve our assests" Or "hedge on inflation"....

at the same time that would also lead more foreigner purchasing our properties.. have you wonder why the government had not increase the cap where property above 1m or perhaps 1.2m would only be eligible for foreigners? perhaps our government is planning to keep those foreign investors in our country as well.

Singaporeans, Thais, Indonesians, Chinese, Arabs, Iranians, Russians, Brazilians, etc are all queuing and waiting to snap up property in Malaysia.

Means the gomen is taking steps to prevent the "crash". No more worry about "crash", right?

Means the gomen is taking steps to prevent the "crash". No more worry about "crash", right?

Your not telling the whole story. 50% - 70% is a huge margin.. and within this 20% margin.. if you take up the loan you will makan roti? are you talking about couple of hundreds? such variance should be huge and if it's too minimal that it forces you to makan roti.. then I have nothing much to say.

that article is just some fresh comments, probably prompted by yesterday's fitch downgrade.

bursa taking a knock today, rm continues to slide.

will bnm raise rates soon enough?

What I meant was, some bank willing to offer up to 50% of my gross salary n some were up to 70% of my gross salary.. If I accepted the one with 70% of my gross salary I sure makan roti la.. If my gross salary is 5K, juz imagine paying up to 3.5K housing loan.. Remember I still havent include my car monthly installment.. Another RM600..  Do u think u can have a decent life? if u can then bravo..