Exactly I don't think his telling the whole story. Adding on shouldn't one be finding something which his own head can wear? RM3.5k monthly you are talking about financing a 650k home loan.. Now that's not too advisable for someone who is merely making rm5k.

Let me take a shot at your query. Any asset other than cash is theoretically a hedge against a weakening currency and inflation. However, I'd find blue chips and foreign equities a better hedge than properties, because equities are linked to profits, whereas properties are linked to debt. Here's why I think that way:

Salaries lag inflation, and inflation lags interest rates which are increased to combat inflation. Ergo, property if financed largely by mortgage debt is subject to an anti-goldilocks zone, where interest rates rise before inflation falls, and before salaries rise, leading to a spending squeeze among those who are highly leveraged.

If inflation is high and currency is depreciating:
- Prices of goods = increasing
- Salaries = lagging inflation (salaries are still paid in Ringgit)
Therefore: Company profits = matching inflation (because prices increase faster than salaries, and because currency depreciation makes exports more lucrative in Ringgit terms)
Therefore: Disposable household income = decreasing

Assuming then that central bank then raises interest rates to combat inflation and shore up the currency:
- Interest rates = increasing
- Mortgage payments = increasing
Therefore: Disposable household income = decreasing => increasing defaults on mortgage debt, putting pressure on housing prices

On that basis I'd prefer (export based) blue chips over properties, largely because the level of mortgage debt held by households currently indicates that the market as a whole is very vulnerable to interest rate hikes.

Singapore is an interesting case study for the relationship between property, mortgage debt and inflation because as a small economy that imports everything it consumes, the government is able to inflation using exchange rates instead of interest rates. Hence, over the past 4 years, property has been a very good hedge against inflation in Singapore because interest rates have not risen to combat sky high inflation. When inflation rises, Singapore uses USD to purchase SGD, allowing the SGD to appreciate, thereby making imports cheaper, and this serves to control inflation without having to increase interest rates. On the other hand, interest rates have been floating at ~0% in Singapore because of the profitable carry trade between the USD and the SGD, where US investors borrow money in USD at ~0% to put in Singapore in the expectation (announced by MAS) that the SGD will rise. This has been a substantial contributor to the Singapore property boom in the past 4 years. Hence, property and mortgage debt would be a fantastic hedge against inflation so long as interest rates do not rise in response to inflation.

The key question then becomes, will interest rates in Malaysia rise in response to our impending inflation and currency depreciation? BNM traditionally uses interest rates to control inflation, so more likely yes. However, BNM has the discretion to copy Singapore by using reserves instead of interest rates to control inflation. What BNM will decide to do is a question for political scientists and psychics with their crystal balls.

Anon good one however there are a few point which seems to be a flaw.
1) interest rate. BNM wants to bring down the overall household debt. Increasing the % of interest will not help in fact it might drive away foreign investors which our government is looking for. Putting a higher interest rate will cause the speculators to go bankrupt over night (hopefully). What BNM aiming at the moment is to stop speculation and reduce the overall household debt. Have anyone of us wonder why until today they are still allowing foreigners to purchase any property which is above rm500k?
2) blue chip. In any case if the economy turn sour your investment will be in a negative cash flow situation.
3) blue chip investment require a large sum of money to return a certain % of ROI. With property it's the other way round. RM60k initial investment for a 400k property and there you go someone will be financing for you and in x number of years the return of appreciation + the payment made by someone else could return you a much better ROI. Of course there are risk on both method of investment.. One requires you to closely monitor the market and another requires you to continue looking for tenant.

Nope.. Bank of sotong didn't include my car loan when they came out with the 70%, if im nt mistaken + car loan it was around 75%... Well there is something called as "over leverage", u can go for a hse which is worth around 7xxK for full tenure of 35 years n previously 40 years... n ur installment will be around 3.1-3.3K monthly.. Thats the reason I mentioned "cheap credit", so easy to get loan for first hse? I did mention about some FD btw, but can that boost my chances of securing higher loan by tat margin?

But in my case monthly installment should be manageable since I will be living with my brother so he will chip in some money monthly, but when I am buying a property they are solely assessing my capabilities in paying back.. So in my opinion that percentage is ridiculous.. Im nt sure wat happen to the 30% margin (Total loan, car + hse)...

Again thats my point... "not too advisable for someone who is merely making rm5k" but doesn't stop me from taking up the loan right?

BNM should never allow such scenarios at all.. Btw so many juniors in my company purchased 5xx-6xxK condo recently n their salary is less than 4K.. Tat shows how flexible BNM has been..

Most of them took 90% loan somore.. but DIBS + discount assisted them too, since many of them spend less than 40K for dp..

This post has been edited by all blacks: Jul 31 2013, 02:46 PM

bank of sotong is quite famous.. not only 40 years loan.. they will give you.. pre approve personal loan.. pre approve renovation loan up to 30% of property value. Yes FD boost your chances to secure a loan. If you have approx rm100k in your FD account you submit your application I think in 2 days time your loan application will be approved without much dispute on it. So in the end you bought it? Double Storey landed?

Country Last Previous Highest Lowest Trend Unit Reference Frequency


Australia 2.75 2.75 17.5 2.75 Percent Jul-13 Monthly

Brunei 5.5 5.5 5.5 5.5 Percent Jun-13 Monthly

China 6 6 10.98 5.31 Percent Jun-13 Monthly

Cyprus 0.5 0.5 4.75 0.5 Percent Jul-13 Monthly


Egypt 9.75 9.75 21.4 8.25 Percent Jun-13 Monthly

Euro Area 0.5 0.5 4.75 0.5 Percent Jul-13 Monthly

France 0.5 0.5 4.75 0.5 Percent Jul-13 Monthly

Germany 0.5 0.5 4.75 0.5 Percent Jul-13 Monthly

Greece 0.5 0.5 4.75 0.5 Percent Jul-13 Monthly

Hong Kong 0.5 0.5 8 0.5 Percent Jun-13 Monthly

India 7.25 7.25 14.5 4.25 Percent Jul-13 Monthly

Indonesia 6.5 6 12.75 5.75 Percent Jul-13 Monthly

Japan 0 0 9 0 Percent Jul-13 Monthly

Laos 5 5 35 4 Percent Jun-13 Monthly

Macao 0.5 0.5 8 0.5 Percent Apr-13 Monthly

Malaysia 3 3 3.5 2 Percent Jul-13 Monthly

Myanmar 10 10 12 10 Percent Jun-13 Monthly

Netherlands 0.5 0.5 4.75 0.5 Percent Jul-13 Monthly

New Zealand 2.5 2.5 67.32 2.5 Percent Jul-13 Monthly


Philippines 3.5 3.5 56.6 3.5 Percent Jul-13 Monthly

Singapore 0.04 0.03 20 -0.75 Percent Jun-13 Monthly

South Korea 2.5 2.5 5.25 2 Percent Jul-13 Monthly

Thailand 2.5 2.5 5 1.25 Percent Jul-13 Monthly

United Kingdom 0.5 0.5 17 0.5 Percent Jul-13 Monthly

United States 0.25 0.25 20 0.25 Percent Jun-13 Monthly

Vietnam 7 7 15 4.8 Percent Jun-13 Monthly


Well if anybody is confused, interest rate for the country is next to the mentioned "country" word. Eg Malaysia is at 3.

Now ours are actually among the highest in the region. Well, my take will be even if FED increased by 25bps, BNM would not increase until next year. Then I could be wrong. And notice how low the interest rates in European and US contries.

bro sorry not good with the figures. Can share with me what does it represent?

No wonder... Never knew FD plays such a big role.. I actually submitted only my base salary and that also can lepas dy, but per annum salary is higher due to bonuses..

Btw they did offer the reno loan which follows the BLR rate + x.x%.. but than I decided to drop the deal n yes, it was a double storey..

I juz found it nt worth it n too much of a risk.. The launching price, few years back was 50% of the current price n the owner actually wanted even more... Paying so much for a sub sale unit which also needs quite a bit of reno work wasn't a gud choice... Family advice me to pull off n I did...

But im nt sure if it would have been a smart move to take up a fixed rate loan through insurance company... Since they are offering lowest ever fixed interest rate n it's kind of immune to interest rate inflation..

These are the current intrest rates for the countries

Well Malayisia is at 3%
Thailand is 2.5%
Indonesia just increase 0.5% to 6.5%
Singapore 0.04%. I am not sure about this. I checked and it is not a typo?
Philippnes is at 3.5%

These are the current interest rates regionally. And then look at
US 0.25%
european countrues 0.5%.

When BNM want to increase rates, they still have to look at the worldwide intrest rates...and indicator will always be from US FED. We can just wait, they will announce tomorrow I think.

ING/AIA? 4.8%? to be honest buying a 700k with RM5k is really a risk but again if you are buying something around 400k I think it's worth to park your money there. Yup the moment they print the CCRISS report you got what kind of saving they also know liao. As long as you park the amount with a bank they will know. Those banker will even tell you.. for your case ah? no problem one la... you got so much cash with the bank and bla bla bla.

On a contrary my brother who do not have a loan with the bank. do not have a credit card. already 3 years working as a sales rep.. want to buy car also need guarantor. In such cases having a minimal debt with the banks will really smoothen up the approval process.

I went to 3 different banks and none of them would have given me such loan. And they will take all your loans include car loan and not just that house loan itself. Frankly, if a guy in my bank approve such a loan, that guy will definitely get a warning or just be fired. Which sotong bank is this?

I said that you should look at the bonus, See how I am making? They dont wan't too. Then look at my increment and my potential increment in d future? Nope. We want your salary per month only. In the end I had to make a joint loan with a family member. But I am bearing it all of course.

4.8 nt tat bad rite? No CC and no loan with bank also is considered as an issue

I actually tried couple of the banks and the worse was the famous P.. B la.. the rest was all around the same amount.. For sotong bank few branches quoted the same amount initially (Mostly PJ n few in KL).. But in my case I produced a letter from the company which states per annum salary for this year which includes bonuses n so on... So nt an issue la since my EA form can back it up...

yeah, the loan that I took also include the loans (car, personal) + potential housing loan in the 70% DSR calculation. this sotong bank is very good to give you such package. plus reno loan summore. must be your FD amount is super high.

I dont think that sotong bank can do business like that, seriously. IF BNM knows they do this they are screwed. If you don't believe me all blacks, you can try and call BNM and ask. Maybe they give you a reward or something for highlighting this to them. If I were an auditor in BNM, this is an audit finding for me, and the bank's CEO is going to be in trouble.

Unless of course they say you are actually earning 20k a month and 70% is actually nothing. Then different story la.

No CC and loan really hard to get financing.. need gurantor here and there. 4.8% pretty high.. monthly I think need to pay extra rm150 if not mistaken had consider it previously.

I'm not too sure but previously I took a loan of rm225k.. they pre approve rm30k personal loan and rm60k renovation loan @ a different interest rate. I'm not too sure whether they are still doing this. Will let you know soon.. applied OCBC loan as well for my recent purchase will get the result soon.

But again the 70% was from my base salary.. If they check per annum then its only around 50-60% which the officer didn't noe when I approached him.. The funny part is that, he mentioned to me that if u r degree holder + professional job the cap is higher which was 7x% percentage of ur gross salary.. I can't see how it actually helps..

Yes, I do agree with the strong foreign fund we having now but at the same time.... How long it would hold on with the debt we having.....I still thinking of where can we check out about the details of the debt of our government in terms of the expire date on any place...besides that China export draw back has really again impact our export lead economy.

This post has been edited by Steven83: Jul 31 2013, 03:37 PM

Extra RM150 isn't tat bad since u can worry less but how much was ur loan bro? I was calculating for 650 - 800K loan n the additional amount was quite high.. My dad always push me to take fixed rate since it's safer... n since he took Government fixed loan previously.. But if u take loan from the insurance company, then need to pay loan agreement fee + MRTA.. Thats the downside, but with banks u can include it into ur housing loan..