The collapse of the US housing market bubble emphasizes how important it is to figure out what property is really worth, from a fundamental perspective. Make sure you’re not over-paying!

There are 4 yardsticks to avoid buying in bubble markets:

•Price to Rent Ratio (or Yield)
•Relative Prices
•Affordability
•Price of new builds


VALUATION TOOL 1: THE PRICE TO RENT RATIO

The gross rental yield) is the housing parallel to the price/earnings ratio. Here is a set of rules of thumb for the housing market:

VALUATION YARDSTICKS FOR THE HOUSING MARKET

PRICE/RENT RATIO GROSS RENTAL YIELD (%)
5 20 Very undervalued
6.7 15 Very undervalued
8.3 12 Undervalued
10 10 Undervalued
12.5 8 Borderline undervalued
14.2 7 Fairly priced
16.7 6 Fairly priced
20 5 Borderline overvalued
25 4 Overvalued
33.3 3 Overvalued
40 2.5 Very overvalued
50 2 Very overvalued

But there are exceptions to this. When strong future growth in value is expected e.g in areas where transport infrastructure is being upgraded then relatively weak present earnings can be acceptable.

There are several good reasons why people should pay attention to the 'valuation parameters':

Higher rental yields push the housing market higher

If rental yield levels are high, this will tend to mean that the interest cost of buying a house is low, compared to the cost of renting a house:

•Potential buyers will pay less to borrow from the bank (in order to buy) than they pay when renting a house. Many will move from being renters to buyers.
•Entrepreneurs will find it makes sense to buy houses to make money, i.e., buy in order to rent them out.

Both these factors put upward pressure on house prices.

Lower rental yields put downward pressure house prices

If rental yield levels are low, this will tend to mean that the interest cost of buying a house is high, compared to the cost of renting a house:

•Potential buyers will find that to buy a house involves paying much more to the bank, than it costs to rent a house. Buyers, especially first-time buyers, may have difficulty financing housing. Banks will be worried about over-lending at loan-to-income ratios which mean that a slight increase in interest rates will mean financial crisis for the borrower.
•Entrepreneurs will find that buying-to-let won't pay.

The house price can be viewed as a kind of circle, with houses prices moving from yields of (say) 4% to 11%

•Yields shifting down to 4% would represent danger.
•Yields rising to 11% would signal opportunity.


VALUATION TOOL 2: RELATIVE PRICES

People tend to actively look for cheaper and better alternatives. Where houses are very highly priced, people will seek more affordable alternatives. So if you’re buying property that’s amazingly expensive on a sqaure foot basis compared to its surrounding developments – BEWARE!


VALUATION TOOL 3: AFFORDABILITY

If house prices are so high that few people can actually afford to buy them, then their value will likely fall in future. A reasonable measure of value is a country’s GDP per capita. In a country where the ratio of house prices to GDP/capita is high, it’s a fair bet that houses are overvalued.

Relative to GDP/Capita levels:
•House prices in Luxembourg, Belgium, Norway, Denmark and Austria seem cheap.
•House prices in the UK, Italy, France and the Netherlands seem comparatively expensive.


VALUATION TOOL 4: PRICE OF NEW BUILDS

If house prices are much higher than the cost of building (construction costs), developers are motivated to put up buildings. So when you see a rush by developers to build, that’s a danger sign. As new supply comes into the housing market, that tends to put pressure on prices. So when house prices are far greater than new-build costs, it's a very clear signal that prices are likely to come down.

and .... who's gonna pluck some Malaysia number in ?

Consider write a e book about the sucess story of your properties investment journey, upload to apps store & Google play, USD 0.99/download.

U don't need any numbers for specific countries. This is a general article written for all markets in general. The 4 signs are very real.

in short, a bubble is otw

I think the bubble is already here. Its just a matter of when and how bad the burst is gonna be. Some areas may experience major drops in prices while others may only experience stagnation.

i would all can be seen in malaysia now.

PRICE/RENT RATIO GROSS RENTAL YIELD (%)
5 20 Very undervalued
6.7 15 Very undervalued
8.3 12 Undervalued
10 10 Undervalued
12.5 8 Borderline undervalued
14.2 7 Fairly priced
16.7 6 Fairly priced
20 5 Borderline overvalued
25 4 Overvalued
33.3 3 Overvalued
40 2.5 Very overvalued
50 2 Very overvalued

how to read the 2 numbers? which is %?

yes... would be more interesting for the next few years

20 Very undervalued
15 Very undervalued
12 Undervalued
10 Undervalued
8 Borderline undervalued
7 Fairly priced
6 Fairly priced
5 Borderline overvalued
4 Overvalued
3 Overvalued
2.5 Very overvalued
2 Very overvalued

Just look at the numbers right next to the wordings. Ive amended above.

Where did you found this?

it will be depending on the financing cost/interest rate also.

lets check how many page before this get close ...

everyday, bubble, UUU, DDD, budget effect ... not bored one meh ?

This is gross rental yield. Not net.

It wont get closed if everybody can comment in a mature manner. Articles and discussions like these are meant to educate.

And what's the average yield of rental nowadays?

4%? 3%?

Yes about 4%.

somehow i feel landed property will stay strong a bit longer..

Yes agreed. Landed property generally has better sustaining power while condo's provide quicker rate of return.

Another sign is

New and high end building but surrounded by poor and torn buildings

people don't like to see the word bubble. maybe can change the title a bit ...

Care to elaborate further ? seen this phenomena in a few area.

i guess mature areas e.g. BU or Damansara shouldn't be affected that much but i suspect Greater KL especially will have a very major impact, especially on high-rise or office investments.

cyber kor,
another doomsday thread?

anyway, generally the article is alright. but it also clearly clarifies exemption to the yield rule eg low yield acceptable in high growth/infrastructure area.

but do you also notice that some of these low yield areas are usually the ones that has the highest cap app?

take landed in general, yields of 2-3% is quite norm. some even lower.
ttdi landed, rental vs price?
bu landed, rental vs price?

if one purely looks at yield, then one can totally forget about commies as well.

personally i tend to look for 4-6% yield props and 'hope' that the yield trends down to 2-3% over the years.

4-6% would suggest mature neighbourhood ;p

Great but a few comments as below
•Price to Rent Ratio (or Yield)
the yield has taken US as a yardstick in which current yield is extremely high after the collapse of the housing bubble.
In malaysia yield is dropping. in fact it is hard to find a property in which rental can cover monthly installment. i would say 5-6% yield is reasonable based on the nett mortgage interest of 4.2%.
•Relative Prices
This is again has taken US as a yardstick. Generally i would have agreed to this but in malaysia property isn't just a normal roof over the head. Lifestyle property with unique selling point has been a great hit. So while i agree to take this relative prices approach, i would still consider premium price to be paid for unique product. Otherwise, there is nothing to judge the price of fernel which has been a great hit.
•Affordability
Totally agree with this. but affordability has also been boosted due to low interest rate in our country. It is not just depend on the GDP/ house price
•Price of new builds
Agree, however information is not available to us.

Another sign - People queue up overnight to buy property in area they never been to... and the MRT station isn't even confirmed yet.

Not to forget about the following that add burden

1) increasing BLR (increase blr 0.50 up soon)
2) increasing Electricity (in talking to increase of 19% next year)
3) Increasing petrol (propose to uplift subsidy and free float base on market price).
4) Increasing Assesment ( in progress already)
5) Difficult to get loan
6) GST
7) Housing loan have to paid up by 10 years

This post has been edited by mlpk: Nov 15 2013, 12:53 PM

Interest rate can be changed at any time.

In fact, given that it is in record lows - I (in agreement with most experts) only see it going up soon.

People will always complain the high price of property. In fact, people never stop complaining about high prices. They all regret ten year later that they did not buy. This story repeats and repeats. Study the history, learn from the history.

For own stay, ability to hold is the key because the value of the house will remain unlock unless you sell the house.

People are getting wiser. Gone is the low share prices during economic meltdown.

why housing loan need to be pay up in 10 years?

Share price would "Never" go down even during[ economic meltdown, I like that ...lol

Those senior & record that show KLSE is at 300++ point during late 90's must be fake, it was actually 1300 point...lol

Eh.. isn't back then 1 SGD were like 1.3 something while today ehh.. 2.5 something, so share price err up or down ah? I also donno.

1300 x 2 = 1800 I supposed.

Bro, im sure you know that sales of new launches are never a yardstick of the future capital appreciation rite? That's just the herd mentality. Sometimes the herd is right but sometimes the herd can be dead wrong. Watch National Geographic and ull see some resemblance. Fennel is a good product if investors have the holding power to go beyond 2017. If not, they are treading on dangerous water. Same as those who rushed to buy Tropicana Gardens in Kota Damansara. Many of them are very happy with their paper gains. But will these paper gains translate into actual subsale upon VP? We'll have to wait and see.

Havent seen you around for some time. How have u been? its been a while eh?

I don't see anybody complaining about high property prices (at least not on this thread). High property prices is not an issue compared to high and unsustainable prices. You need to know the difference.

Besides, im also a property investor but a very prudent one. I was looking to purchase my 5th before end of this year but with the latest news, ive adopted a wait and see approach.

No housing loans need to be paid up in 10 years. This clause is only for the refinanced amount that's greater than the original loan amount.

i dunno but almost everyone is buying property for "investment" ... a sign?

Good, my friend.

Btw, since you are another TTDI kaki, you may be interested:
Since I informed my agent contacts that I'm looking for good-value props around TTDI, phone has been ringing non-stop with news of 2 auction units in TTDI.

1 unit 2000sf TTDI Plaza 910k
1 unit 1700sf Sinaran TTDI 950k

Both non-bumi, agents desperate to do a deal.

Seems like subsales is plenty slow. Those prices are close to 2010 prices IIRC.....

Already viewed the sinaran one. Just next to LRT but again next to LRT track too! LOL....so got pros and cons.

This post has been edited by joeblows: Nov 15 2013, 03:29 PM

Aiyo! Not these 2 condo's la. Very poor sales / capital appreciation. Hold many years also not sure if can make any profit. These 2 condo's good for own stay only. TTDI Plaza is the worst. Bad feng shui. None of the retail outlets there are doing well. So many change of owners. Dunno what's wrong with that place.

Anyway, those prices are the starting auction prices rite? Furnished or bare?

This post has been edited by cybermaster98: Nov 15 2013, 03:42 PM

Actually, not really.

TTDI Plaza would be my choice out of the two units (although just barely lah). With Hero Market opening up downstairs, plus general upkeep of facilities, it is really not a bad place to live for self-stay or even expat rental.

The only (major) downside would be shitty parking (only 1 car park lot IIRC) and horrendous access going in and out (congested roads, bad road condition due to contstruction and idiots parking haphazardly along the road).

I know as my parents own a unit there jointly with my aunt (a retiree) who lives there.

Auction price is starting price, yes, but according to agent they don't expect the price to be bid up a lot due to low interest.

I think the Sinaran unit could be bid up to above 1mil if you're unlucky (cos got more rental potential) but the Plaza one should not go above 950k - general consensus from agents.

Bubble? only when Chinese run out of bullets

Where are the foreigners who came in by bus load?

For all states in America perhaps..

Everyday char kuey teow

Empirically, when the ratio of house price to household income exceed 8 is unsustainable.

i agreed too... and some unit are facing the Malay cemetery

just that new tenants more prefer new and revamp location with amble facilities and amenities.

If u ask them to open business in pandan idah, hell NO. Like war war 2 zone

Won't happen next year

Barclays Plc joined UBS AG (UBSN) and Bank of America Corp. in forecasting a Hong Kong property slump, predicting home prices will fall at least 30 percent by the end of 2015 as income growth stalls and supply increases.

http://www.bloomberg.com/news/2013-10-28/h...clays-says.html

this is the begining only. more to come

https://forum.lowyat.net/topic/3032372

This post has been edited by mlpk: Nov 16 2013, 01:12 AM

Another sign when stock market undergoing a super bull run, coming soon

Sinaran doesn't face the Malay cemetery.

Are you buying??

It would be great if there are specific numbers for the locations in KV 😎😎😎

Are these condo half full or half empty??? Errrrrr..... Investment condo 😭😭😭😭

It's not Sinaran...i mean TTDI Plaza unit...

But Sinaran owner unit are facing one of the major problem.... NOISE!!!

Would anyone look at broader view of the market now in the ASEAN region? Not forgetting China, Japan, Korea & neighboring Singapore who are eyeing actively here since property investment in these countries become less lucrative.

Greater KL properties are not higher price than many capital cities of ASEAN countries now but with massive infra & new development in the progress, our home ground price will be too cheap if it does not go up by few folds when our city is second best to Singapore in ASEAN.

What do you think?

I have seen quite a few thread discussing about property price going down been closed by admin, most of the time due to a few members posting turn nasty, instead of taking action against these members admin take simple/sided approach by closing it, at time tge thread last less than a day, before other members who have their view point or prove that indeed some new complete property is offering discount, eg. I just saw banners near jalan gombak offering 10% discount + free legal fees for Setapak Green condo.
Some member such as Donald Trump had numerous posting using vulgar & inappropriate language, if admin do not understand chinese I am glad to translate on behalf, in fact I had made an report on him once, but I do not see changes nor warning given by admin.
I do believe admin job is to maintain forum rules & order similar to polis in our society at large, rather than give their stand toward opinion of different camp of forum members, just like law enforcer stand on political believe of various party, when conflict arises.
I do hope lyf property talk can maintain as a civilised & non biased property forum.
I chose open approach this round so that other members can give their view point towards this matter, I too do not think there is necessity to start a new thread, therefore choose post in existing one.
For the better of the forum.
Regards
Jolokia.

My apology if my name or ID appears misleading here at this forum as it carries the word "lowyat". I just created it so I can easily remember. As a genuine property buyer, look forward to your comments.

Thanks,
TY

Where are the foreign buyers in these development? Too cheap for them to consider?

A strong guess is KL prices will b too cheap that the China Chinese, even Korean & Japanese must buy. Many HK buyers have already bought into few prime city areas recently, that's what I heard.

TY

no such thing as bubble la. sweatz.

Well another factor considering ownership vs rental, the yearly assessment has just been double and I am sure many has received their 5 fiqure assessment for kl properties. I know a few friends who has just been slap an RM10K assessment to be paid and their rental is just RM1,500 a month so for FYE2013 it would been a lost for them after loan repayment.

http://www.thestar.com.my/News/Community/2...esidents-l.aspx

How come not reflected in the data?

10K assessment doesn't mean owners pay RM10K/ year, just percentage of it eg 6% mean RM 600 per year divided into 2 payment of RM 300 every 6 months.

As for the word bubble just mean rapid price increase, faster than income, only when it reaches unsustainable it's burst@decline than is a problem as real estate bubble r more critical as it may last for years compare to stock market, but can be a shopping gala those who r still loaded after economic "Haiyan". .lol

Hong Kong has one of the world’s lowest birth rates—1.11 per woman of child-bearing age asof 2012, far below the replacement rate of 2.1.
With just 1,032 babies born in 2009 to every 1000 fertile women, it is estimated that 26.8% of the population will be aged 65 or more in 2033, up from 12.1% in 2005.

Speculation, money laundering, black money, underworld king ping turn developer.

Another fake demand like previous oil crisis which proven to be a scam.

Hong Kong has one of the world’s lowest birth rates—1.11 per woman of child-bearing age asof 2012, far below the replacement rate of 2.1.
With just 1,032 babies born in 2009 to every 1000 fertile women, it is estimated that 26.8% of the population will be aged 65 or more in 2033, up from 12.1% in 2005.

Speculation, money laundering, black money, underworld king ping turn developer.

Another fake demand like previous oil crisis which proven to be a scam.

Supply of land in HK has always been limited.

This post has been edited by icemanfx: Nov 16 2013, 11:46 PM

If cant pay my mortagages, then my world bubbled even the world is not.

It is hard to accept reality that can't be fixed.

Bubble bubble here we go again. Bubble tea.

R.Kiyosaki also die because of the bubble.

Serene.Ashley

Wah seh
You better study properly before comment

I think he already reply yr question, there are price correction even thou you said HK with limited land always said never drop.

A bizman will never use this method unless it is the last move of a dying biz. Remember that.

How do you know it will never drop to that level?
Nobody know, it may up also. The research is done by the big company there. Surely they know better.

This post has been edited by Iceman74: Nov 17 2013, 07:01 AM

Happened doesn't mean ppl wanted to. Ask around those successful biz ppls, will they do that if there is others options.

Sorry, is not me who copy/paste the articles.

That is your Opinion. You ask mod/admin check it out. I'm open for it.

I close my case since you think diferently.

i know ex mca president, tan koon swan did that. now he is a tycoon in china. guess he is very happy living in china
maybe they are many biz man did that, we know only those famous ppl.

hk strong housing demand mainly driven by the rich china mainlanders. it is happening since 1900's

1900's China still under Qing Dynasty..lol

1990's U mean ?

Driven by black money actually, China no.1 black money & 2nd place ahemm...u know lah . blink2

Eventually price will come down as history repeat it self no exception, last one who get time bomb will suffer dearly.

This post has been edited by jolokia: Nov 17 2013, 10:11 AM

In malaysia no need to study charts, research one. As long as banks are giving out 90% margin at the current blr every tom d*** harry mat kumar and ah lim can BBB. Jst wait till blr increases and loan margin reduced then we reopen this topic

This post has been edited by SantaBarua: Nov 17 2013, 10:13 AM

Concurred with you, historically, property market boom is fueled by easy bank loan. The crunch will come when bank loan is tighten or rise in interest rate.

R. kiyosaki bankrupted this company to avoid paying his partner, show r. kiyosaki is not a honourable person to be a partner.


Stock market is a zero sum game, innocent investors lost their money/saving by these swindles, these people are white collar criminals should be jailed like Bernie Madoff.

This post has been edited by icemanfx: Nov 17 2013, 11:24 AM

Agreed. IF this forum can be any beneficial, both spectrum of the matter must be discussed freely without being put-down. Extreme of either sides can only lead to irrational exuberance or irrational fear.

This post has been edited by HuiChyr: Nov 17 2013, 11:30 AM

In my humble opinion, this is the "fear" that got ppl to commit to high priced property. The idea that property price can ONLY go up creates an urgency to buy NOW or else.

Sometimes, the unlocking effect comes by desperation or coercion when interest rate increases and debtor cannot pay their monthly installments. Foreclosure in short.

Any market may it be real estate or stocks fluctuates with time. It is a matter of the frequency and magnitude.

This post has been edited by HuiChyr: Nov 17 2013, 11:44 AM

I believe foreigners are cautious after the increase in RPGT. Majority of them are investors and flipping even faster than any local investors here.

If these foreigners are international players, I believe they already positioned themselves in USA and Europe after the sub-prime crisis. Or worst, hovering around like vultures for the next property bust in Asia.

Any signs that are easily detected by lay-man? 😎

Empty units? Minimum lighted units in condo?

What about the supply of houses more than the demand of houses? Some houses the like double storey link subsales selling very high comparing with Developer housing project SP Setia DSL.

u dun read history kah?
u know sun yat sen n gang era or not?
even "china daily" is established in HK. they r so many chinese living in hk during the period.

tnb should publish the data of empty units. eg how many units are zero reading for 1 year. if they are some usage within 6 months mean the owners may use this prop as holiday or temporary stay when visit KL.
some countries did publish this data and it is very helpful for investors/home buyers.