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.

Agent.. can transact or not??? Saw a poor guy selling off his bandar mahkota vista.. cheras vista wor.. since 2 years back which is 530k.. every month increase till now 680k.. but haha lelong liao starting at 350k wor.. so many landed waiting to br resell le h

Its not about arguments and its not about getting a message across. It was meant to be a REFERENCE POINT. Its not a competition and i dont really care who starts any thread. But after so long we finally had a thread which has specific signs of a property slump which we could reference in the future to see if it was true or otherwise. And now because of this typical poll type thread (which we have had hundreds in the past), we will lose that point of reference. This thread is just another one of those DDD or UUU thread we have seen. Nothing differerent. Polls are also not reflective of the reality of whats happening (as we all know). Sadly we have now lost a good reference.

This thread is NOT a continuation. If it was a continuation, it would have been a Version 2 of the same title. But now its just another one of those threads. The title means alot for future reference. The poll means nothing (as always) and no there will not be any reference because nobody will be looking for this thread as its just another one of those normal threads. You started this thread without giving me (or anybody else) a chance to continue a Version 2.

Again, its not a competition. I merely wanted to create a proper reference thread with the proper information contained not just to have a DDD or UUU discussion. Now that is lost because of how this thread has been positioned. The meaning has been lost and cannot be found with a title like "is the bubble bursting'.

What sense of market sentiment are u getting from the poll? Who are those voting as Option 3 and 4 in your poll? U think those are all actual property investors? Do u know how many of those commenting here are agents? U diverted the whole discussion into a poll which means nothing because this poll (just like all previous ones) are NEVER reflective of actual market conditions. Ask any seasoned contributer in the property section of LYN and they will tell you.

This thread was a mistake not because of the type of discussions but because we have lost a good reference point because of your haste to start a topic and get your name on the board. I had no issue with your thread until my Version 2 was closed cuz that meant a loss of reference. U think this thread is gonna be alive in months to come? You obviously have not had much experience in LYN Property section for sure if ure thinking along these lines. There was no reason for you to start this thread so soon after V1 was closed. Now this will become another one of those 'also rans' type threads about the future of the property market.

This thread is discussing about the general enviornment.

But i always believe that there are still good number of people making money in the bad time, and some people even making lost in good time. This applies on the property investment scene as well.

What make u think those zero/low entry flipper can hold on to their job during bad times ?

What make u think those waiting for dead chicken r poor folk & will to get kicked out by company during bad times ?

In fact the most dangerous group during bad time r those over committed flipper/investors & property agent.

Please differentiate between cannot afford & not stupid enough to pay over inflated price.

Thats why i said this thread should never have been turned into a poll. It just gives rise to such comments n arguments. Its also the thread starter's responsibility to try and ensure discussions are kept civil to a certain extent. Thats what i did on my earlier thread and everything was fine. You on the other hand havent had much input on this thread which is a pity cuz a reasonable thread earlier was closed cuz of your haste. Did u also note that many of the discussions here are actually 'empty' talk Lets see how long it takes to reach 120 pages. Even i have stopped providing any valuable input here. Why bother when the thread isnt going anywhere and cannot be a good source of reference in the future? When this thread is closed in 100 pages time, who is gonna bother to refer to it?

Ya lar.. gen y.. sumore I dare say 70 % chinese flippers.. and most are agents.. and 50% percent sure utar grads if I m not mistaken.. they think their utar network is big...

these agents only flip in chinese mainly targeted area.. othet area they no go..

worse ting is expect the upper middle class and professional to buy from them.. siao ahhh

Malaysia’s Property Sector to Remain Competitive
posted on Jan 24, 2014
article source from Borneo Post

Malaysia’s property sector is expected to remain competitive and stable this year as Malaysia had only imposed a third round of property cooling measures.

“Compared to Singapore which has so far imposed eight round of cooling measures, Hong Kong (six) and China (five), Malaysia definitely stands in a better position,” Malaysia Property Incorporated general manager Veena Loh Geok Mooi said.

Earlier, during her presentation, Loh said in the first half of 2014, the market would be softer as buyers would adopt a-wait-and-see attitude due to the announcement of the real property gains tax (RPGT) which would discourage investors who were in for the short haul.

Investors are mainly attracted the most to properties in Greater Kuala Lumpur, Johor and Penang. She said Kuala Lumpur offered the highest gross development profit (GDP), given the employment opportunities, per capita income, population and sufficient transportation facilities such as the Mass Rapid Transit system which links suburban areas within the capital city.

Iskandar Malaysia in Johor, with a 7% to 8% annual GDP growth, experienced an increase in property purchasers by Singaporeans and expatriates as they were cheaper when compared with those across the causeway.

Expatriates working in Pinewood Studio, Legoland, Hello Kitty theme park, Medical Healthpark, Southern industrial and logistics clusters and educity were among the buyers of properties in Iskandar Malaysia, Loh said.

“Penang’s real estate, on the other hand, has made it to a US-based publication’s list of eight great places for foreigners to retire in, along with its connectivity to international destinations.

“However, Penang was expected to face a glut based on the assumption that future property projects, when they come on stream by 2015 or 2016, would result in a surplus supply of 44,844 units,” she added.

Cautiously Optimistic Outlook With Property Developers in Iskandar Expecting Tough 2014
posted on Jan 28, 2014
article source from Star News
written by Zazali Musa

The “feel-good” factor that was prevalent in 2012 and 2013 for the property market in Iskander Malaysia is unlikely to continue this year following property cooling measures introduced by the Government in the last quarter of last year.

Property developers are rather cautiously optimistic on the market outlook for 2014 and are anticipating it to be a tough year for many.

Johor Real Estate and Housing Developers Association (REHDA) branch chairman Koh Moo Hing said the Year of the Horse would be more challenging and that developers must be well-prepared to face the worst.

“I assume that many of our members will adopt the wait-and-see approach in the first-quarter of 2014, to see the real impact from the (property cooling) measures,’’ Koh told StarBiz.

He said the measures were not something new as other countries would also resort to similar measures to ensure locals were not sidelined and denied from owning houses.

Koh said 2013 was the best year for 30 odd members of Johor REHDA who participated in the Malaysian Property Exposition (MAPEX) held here in May and November.

He said these members raked in a combined RM3 billion in sales over a one-month period.

“It would an achievement if they could repeat the sales figure again for this year’s events,” he added.

The 30-day period starting from the first day of MAPEX is the benchmark used by REHDA to determine the value of sales by participating developers.

“Johor MAPEX to be held in April will give a clearer picture on the Iskandar property outlook and how developers are coping with the uncertainties and challenges,’’ said Koh.

He said developers would be ready to face the tough year ahead and adapt well as they had experienced the ups and downs in the industry over the years and emerged stronger. Koh said that speculators would be phased out gradually from the property market with the implementation of the measures with owner-occupier buyers dominating the market. "This year’s launches will see between 100 and 200 units with more developers opting for landed houses as demand for them is still strong in Iskandar,’’ he said.

KGV International Property Consultants (M) Sdn Bhd director Samuel Tan Wee Cheng concurred with Koh that the market would see more serious buyers.

But he said buyers would be more cautious on the new policies – the real property gains tax (RPGT) and the hike in ceiling price from RM500,000 to RM1 million for foreign property buyers.

“Prices of houses will continue to go up this year, determined by the policies and escalating costs of labour and building materials,’’ said Tan.

He said it was matter of time buyers especially first-time house owners decided whether to continue waiting or make the kill before the prices move up north.

Tan said if the prices continued to go up, more buyers would go for the secondary market where prices were between 20% and 30% cheaper compared with new launches.

“For instance, the average selling price for a new double-storey link house in Iskandar is RM800,000 per unit, but if you look around in the secondary market, you’ll be paying RM600,000 for it,’’ he said.

Tan said landed houses in the secondary market came with generous land size and bigger floor area plus ready amenities and facilities within the neighbourhood or the development.

He said if this could prompt developers to lower the selling prices of their new launches to attract potential buyers and also offer no-frills houses to cut costs.

Tan said foreign buyers would continue to buy properties in Medini, Nusajaya as there was no restriction to foreign ownership in the area and they were not subject to the RPGT regime.

S P Setia Bhd divisional general manager Hoe Mee Ling said many uncertainties in both global and domestic market might affect the property market in the first-half of 2014.

She said among the issues were the pressure of increasing costs as a result of skilled labour shortage, reduction in subsidies beginning with petrol last September and electricity tariff adjustment in 2014 and policy changes.

“However, challenges always come with opportunities and there are still positive factors in the Iskandar property market,’’ said Hoe.

She said the fundamental demand for properties in Iskandar would remain high and strong as long as developers could adapt to their products to suit this demand. Hoe said the outlook was still good as properties fetched good yields and were the best hedge against inflation.

Luckily we have very "honest" & "kind hearted" Developers / Property Agent to "Advice" us to buy fast 2 before property price go further north,  Good social responsibility,  U know they can always keep quiet & let U all stupidly wait & sell to U all at much higher price in next few months.
Now who says they r heartless..Bravo Developers. .

Take these with a pinch of salt.

MPI - mission to attract foreign investment
REDHA - mission to sell house.

Even house agent's words are more trustworthy than developers!

Ultimately it always ends with egoism displayed by both side of the camp. eg. my d*ck is bigger than yours comparison. Yet many whom self professed "logical", "sensible", "smart", "knowledgeable" constantly ask why such topic is always closed accusing the moderator as being biased.

Seriously wondering whether keyboard warriors do really feel ashamed?!

Anyway, whether bubble will burst or not; or whether there are bubbles, no one is certain. Even economist are in 2 camps. So whom are we to say yes or no?!.... Oh I forgot, many claimed to be this and that, expert this expert that, experience this experience that. My bad!

My 2cents and take it as final warning which risk closure of such topic again.

Lay your points and debates with points. If got source, point sources.
There is not need to reply every posts with sarcasm or just to retort.
Once points are laid, everyone can judge for themselves.
There is no need to "dictate" which camp one should be in. Again, comes back to my initial point, everyone can make their own judgement!

So if this topic goes off with everyone showing how big their "d*ck" is once again, say good bye to this topic!

Kill the thread and lets start a PROPER thread. Long overdue. Told u that you cant start threads with polls and expect sensible discussions.

Well when people talk lies about me i will defend myself. Just clarifying that.