This is a continuation from V6:
https://forum.lowyat.net/topic/3212945

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 of 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.

Vince Cable, the business secretary, proposed on Thursday that the Bank set a cap on mortgages at a ratio of no more than 3.5 times of salary, as opposed to five times income being offered now.
http://www.theguardian.com/politics/2014/j...on-house-bubble

Those we think bnm and locals are prudent and conservative in lending may need to reconsider.

In any bull run, be it stock, gold, etc, the longer it take to crash, the harder the crash. The seriousness of the crash could be indicated by this thread version number.

We shall wait till the crash and buy. Cash buyers will not have anything to worry about. 3.5 is nonsense. Make it 1. Let see who can run faster.

I see that it will not crash currently. Instead, I see genuine buyer (own stay, hong haul) still buying for kids, with parents. I see flippers stopping, and/or busy selling off as fast as they could the props they bought once VP. Still it will not be crash, maybe they take less profit due to government policy. Current pricing of new launches are future price, thus leave very little room for substantial appreciation unless previous launch price point.

I see SoHo/Small-studios, turned into MINI HOTELS, perhaps whole floor renovated. A new type of short/long stay, with good service and high-speed WiFi and even privatised room-service (if that property do not have such service already) Effectively turning it into some kind of TIME-SHARE kind of stay. But this is in reverse order of TIME-SHARE. This is due to so many of them swarming the market. Good enough for short-stay (1 - 5 years) but not for a family of 4. SOHO will become a sort of 'PIT STOP' prior to a bigger (approx 1025 - 1500 sq ft) living space.

Just thinking out loud here.

If you talk about SoHo/Studio, I think they called it Homestay.

SOHO is not pitstop. Its not really suitable for family with kids. Only for newly weds yes. But I think most wife will kill you if you buy studio as wedding house. Hahaha...

Currently the price is not crash because no transaction or no buyer in the subsale market. I don't know what the buyer waiting for. Crazy la.

This post has been edited by gogo2: Jun 16 2014, 10:44 AM

So.. v7 already.. bubble bubble.. picture is getting clearer

Parents assist their kids with downpayment is common. Those rich parents that could buy for their kids are likely to have multiple properties, would have bought earlier. Realistically, number of parents buying for kids currently is very low.

Converting surplus soho to hotels is only possible if the whole floor is owned or leased to a operator.

Not really clear though.

I see from thread https://forum.lowyat.net/topic/2967053/+260

still got a lot of people buying new property.

Just that subsale got not much transaction. LOL...

How sure are u???
Because your parent didnt buy for u then u think parents buying for kids very low??
Vice versa, I think parents buying for kids these days are very high......

Not only that. Non-parents also buying for their non-existing kids too.

From Original, V1 till V7. Bo clear oso can not lar.
Till V10 lagi clear. 😄😄

More people spending time here is a good indication of bubble.

I see that other threads are not so active now, while this thread becomes more active. Really bubble is going to burst.

Parents buying for their children is increasing cos Property is ever increasing making it very difficult for our future generation to buy properties, esp Landed.

Anything but no bubble. My own family members and few colleagues just bought million and multi million dollars worth of property each. Another colleague is viewing units thinking to buy for son graduating soon.

It is a different ball game now, people are buying for own stay and hedging against inflation. Less hit and run flippers.

Now you see the real deep pockets in action.

Statistically, 90% of parents couldn't afford to buy for their kids.

That's why you don't see much house in auction.

Reach which version bubble only will burst ??😄😄

Many around me stil planning for kids future by buying props. Some decided to migrate one no need to Tok la.

But for me I dun buy houses. I cont buying shops factories and lands. By time kids grown up, I sell one by one to get new resi for them

Can say liddat boh???

if you are using Dept of Statistics, 80% of MY earn less than RM3K per mth

but majority of these folks are not in KV, Penang, JB, etc

You must focus on whet segment you are referring to

There re are Lies, Damn Lies and Statistics

For all intend and purpose, we are referring to Hot / Popular Spots and in these places, more and mope Parents are buying for their children.

Many are forgoing their own luxuries such as Cars, holidays by investing in Properties.

Maybe won't burst.

But the objective of this thread is achieved. We now have a bubble market. Congrats to me and other UUU forumer. Also thanks for suiyi for snapping up all our VP'ed house.

True. I see many business chaplap because spending by household is getting less.

Only property can huat huat huat.

Hoh seh liao!!!!

The day when all other threads in lowyat forum are dead, left with this as the only active thread.

Happy ending from V6

Yeah parents buying for their kids because don't want them to go overseas or other state to work.
Want their kids to settle down fast to start a family.
Or in some cases, parents sell their bungalow or big house which was affordable years ago, and buy a smaller place. The extra are down payments for their kids home.

Some kids are intelligent and make good use of their parent's help to succeed in life. But some just waste the help and spend, spend, spend.

I guess these parents were smart and grabbed some properties several years ago.
However, in the following generation, it will be much harder.

Hey, this make a lot of sense..

Definitely can!
Surrounding me..... ppl who invest in prop..... i would even define as 100% of them planning for their kids... And tat would definitely includes myself too.....
Thats why i always feels tat technology in some way benefits a lot, gaining knowledge & info without travelling (u see the world in computer of course )..... however it also kills a lot of personal touch, the real life ppl, the actual happening surrounding us..... sad for those who dont kno how to catch the balance of it.....

By then bubble already pop.
But one thing I'm sure of is that banker with strong connection to rich ppl and vice versa buy up the properties under water even before it was auction off. And these props are usually good location and rental. Props auction off are the ones that rejected by these rich dudes.

Understandable bcoz long auction list doesn't look good for the banks.

New launcheas though can finish all units some do not. It takes longer time ..

subsales is the one worring.. subsales market are 80% for home stay and not investment.. subsales slowing down could br many factors

a) price too high
b) loan too strict
c) anticipating burst
d) too many new launch choices
e) oversupply
f)etc..

So isn't that a bad scenario?
Sub-sales cannot sell but new launch can?
So question is; these buyers for developers, are they really home stayers or investors/flippers?
General knowledge (not universal though) is that there's price appreciation from new launches bcoz it's like buying from wholeseller or direct from factory. Moreso, loan approval is easier compare to subsale because influence from developer on valuer and banks.

If parents are truly buying for their children now means there will be less demand for property in the future.

I think this thread will continue until 2020 as the properties will still remain strong and growing. I will buy properties now, won't wait until burst coz that time, all people will further trim their pocket and won't spend $$$ on buying properties due to uncertainty (such as interest growing up, job retrenchment and etc). Even I have $$$ during properties burst, I would rather spend on investing in shares rather than buying properties. What properties can do for u when it burst? Lol

Hopefully, this admin won't continue this thread until death.

Oh I see.

There's an auction in Penang with a landed house in good housing area dropping from RM650k to Rm585k to RM527k.

I'm very interested. Unfortunately my wife decided otherwise.

So means, the rich people not interested with that house. Must be very bad fengshui.

i dont kno........ Maybe u r right........
Then what about statistic of prop investors holding prop more then 5yrs, 10yrs or even 20yrs?
What about statistic of prop investors holding more than 1 prop? more than 2 prop, 3 prop?
If 90% of parents couldnt afford to buy for kids, why those launching prop still got snap up? All those are in the 90% group? Msia population increases so fast? If its not the 90% group, they are in the 10% group, all first time house buyers?
If u really wants to kno the real prop market, speak to real ppl instead of reading those statistic or report la..... u'll start to realise there is a great different between statistic, report & those real happening surrounding us.....
If i dont remember wronly, i mentioned this statement before..... One of the main reason i dont really trust those statistic and report mainly because i never found any of that is inline to myself or my circles of friends...... How to depend on it???

All the factor seems like logical

Actually people want to buy new because buying subsale feel like being suiyi although many discount from subsale. Huhu...

Especially if you buy old area (RM200k landed) at high price (RM600k). Imagine you are high class earner living in low class area. Many avoid buying this type of subsale I think.

Sound logical also. But their children will buy for their children's children's children?
But parent house who stay? Maybe sell?

Yes bro. Buy property more important. Trim pocket. No need to spend on expensive food.

Sales before auction.. private treaty.. but the seller must agree first.. nevertheless bank officers.. too can buy..

even then it also take an investors with balls of steel like appreciatove dude to buy at those injury time

This post has been edited by bearbearwong: Jun 16 2014, 12:39 PM

Not ncessarily.
May property portfolio for these rich guys are FULL.
You don't expect them to put 100% of the wealth in property right?

May be this time u really predicted the future trend, demand start reducing after the baby grow up, and this is going to take another decade or more.

The ultra rich guys are of different league compare to most of us. They can buy cash and hold it for years.
They also have the bargaining power on the terms and conditions and prices too.
They take up 10 properties at once for price way, way cheaper than market price. And for only one reason ... these ultra rich are businessmen/women. Their REAL asset is their business. Properties are just to "park" their cash for hedging against inflation or tax. If their businsss go down the hole, they may need to liquidate their properties to pay off or collateralize their properties for cash.

Bankers are not property manager, they are money managers. They prefer cash (or equivalent) to balance their balance sheet.

At "injury" time, the overleveraged will suffer the most. Businessmen (not all) have higher chances to survive.
Look at Tan Sri William Cheng ... owed Rm2 billion since 1997 ... still living the luxury life.

This post has been edited by HuiChyr: Jun 16 2014, 01:05 PM

the pama buy for they children is very minority la... juz my concern is population of none bumi cannot pick up, then the prop market will truely bubble after 2020..

If buy to stay, just buy.

If buy to goreng. Do it.

If buy to rent..... Probably not.

I recall some were quite adamant thats it was common for parents to buy for their kids

no la... normally pama juz put down payment. except ur born in mr lee, mr tan mr. yeoh family then yes lo... how many of them???

I don't understand these numbers. Maybe some characters missing from my screen? Please explain.

No need Billionaire pama lah, i see some meat seller, small shop ownwer, businessman also buy 1 property for each of their kid, fully paid, renovated & furnished.

I notice some property launch in 2013 & Q1 2014 still can't finish selling, good location but price slight above average of that area, seem like buyer really picky, they will compare under construction with newly complete unit, no more die must buy, any garbage also people buy, 10-15% extra also they will give it a miss.

Market on 2nd half & GST doesn't look like going to have significant impact on market sentiment.

somewhat agreed on PAMA buying party (DP only I pressume) for their kids. Remember the baby-boomers, they are the one who pass on wealth to these peeps and so on. Now perhaps the wealth pass-on by boomers to kids it being passed on to the kids' own kid (grand children) All scared if don't buy, die. I notice a lot of this group while happily visiting showrooms. Young couples too. For those no help, SOHO would be a starting point to force save. Only worry is scared eventually tho property not burst, it becomes in HK aing (Fu Ji Chan). Means loan of prop is higher than price of prop. Looking at current situation of dev selling at such exorbitant future price, it is not an impossible scenario, taking inflation into consideration? CHUI SUI END

my uncle lor ~ own 2 electronic shops business ~ 4 children ~ 1 each, paid full but at butterworth area lar

PAMA buy or kids is a very chinese thing, when they can afford it (full payment or DP) During my grandma time also the same. We never stop worrying abt our kids

1 fren oledi prepared 2 units per kid with cashi. No crash so soon la

Ultra rich are more likely to buy in sg, london and australia.

If like this, current property supply where got enough?! better snap up before pasar malam stall owners, hawker stall owners, etc jump on the band wagon.

Developers are keeping these units for r.e agents to cari makan else r.e. agents got no energy to blow water.

Price doubled in 3 years, what is 6% gst?

Your fren so behind one, heard some are buying for their grandchildren.


This post has been edited by icemanfx: Jun 16 2014, 02:13 PM

Agree with you bro...I believe parents buying for kids these days are higher as their kids couldn't afford to get one with the current property price..Hahahahha...

Now no crash, just stagnant, again. U know the saing, STILL WATER RUNS DEEP. U never know during this period. JENG JENG JENG!!!!! cue creepy music

If these kids can't afford to buy in the future, where to find suiyi to subsale?

Flippers have super long holding power, waiting to catch suiyi in deep water.


This post has been edited by icemanfx: Jun 16 2014, 02:22 PM

GOT. some ppl dun want the headache of waiting on new launch dunno how many years ready. And when ready dunno how the management is gonna be like. ANd also worry about the type of peeps staying in say a condo. That's me. I go sub-buy. Less headache and you can study the environment as is.

Sorry wanna add, I also meant that yes some ppl dun mind spending more on sub-buy for peace of mind and fast move in, if that buyer being eyeing that place for some time. Purely based on buyer liking the place. Money is not the only thing, its the value they see.

This post has been edited by den: Jun 16 2014, 02:31 PM

Yalo. I oso dunno y he buys cashi. If get loan can strike great grandkids tim. Btw he bot London Aussie Singa n Malai. 1 each in Malai 1 each around the world. I dun und the strategy.

Bro it is not too late doing it now. I am buying for my yet to born kids as well. By the time they go university the rental could be use to cover their living expenses.

Really ah?? Then wish u good luck lo... u really don know what is happening to the market...

Buying for your yet to born kids, or yet to get mistresses? I hope you put it under your name. Which brings me to another topic. Divorce rates are high. This is also a time when you may find motivated sellers selling at 'reasonable' price compared to market. I believe a lot of so-called auction prop spawn from this sad phenomenon. END OF TOKOK

Now then u start to see the big picture???

Boss, when one is full loaded with cash..... u dont really need "deep" strategy.....

You mean your fren can't afford nyc, monaco, marbella?

If your kid study in overseas than one unit won't be enough.

One where got enough for mistresses? Need a few more so rental collection would be enough for her upkeeping.

Forgot to add spm school leavers, mlm people, insurance salesman, etc to the number.

Who keep cash?

This post has been edited by icemanfx: Jun 16 2014, 03:00 PM

Oh tat I really din ask. But he has a plan which I can't und. So me kicimiao kenot ask too much. Can Onli look with envious eyes.

Getting fustrated already??
True enough.... these are the bigger group of prop buyers..... Well, their income depend more of their "hard work" and "effort"..... Not so much of fix income earner..... These group of ppl mostly believe in "themselves" more than those "reports"....... They come with lower education level, do not kno much about "economy statistic"..... So they jus do basing on what they can and they hav.....
Whereas, for those highly educated ppl like u.... u wont do something without studying those "economy statistic"...... U scare of becoming a laughingstock if your investment fails..... Scare ppl criticising or laughing u doing a "stupid thing" as u are highly knowledgeable or educated...... Scare ppl asking u why doing something against the economy trend..... and etc.....
So the advantage of not highly educated ppl when an investment fails is that they hav the ability of giving "an excuse"; "I dont know woh", "I dont know mah", "I not educated mah".......
Good luck to u......

This post has been edited by AppreciativeMan: Jun 16 2014, 03:35 PM

Implying you are a member of this group of people.

grabs popcorn* movie starting again Version 7. The return of the BBBs.

I hav always says b4.... I'm not educated ah.....
I only kno..... "buy low sell high", "buy high sell higher".......

Over the weekend, I felt like the BBB scenes are coming back again.

This time, there are people who will buy CASH.

I heard from DDD that some of them are actors hired by developer. But I don't believe DDD. Some of my friend DDD say that when I show them you post.

This Time huh... then last time use what to buy one?

Yup .. this thread has gone down the drain.

I don't get it: why is everyone either all BBB or DDD. There are always bargains to be found and suckers getting taken advantage of.

Holding a property is a longer-term proposition that investors hold through more than one cycle. It's where in the cycle you enter and, honestly, you'll never really know until years have passed. Listening to you guys argue about whether it's a good time or not is like listening to a bunch of little girls arguing about the colour of unicorns.

They're whatever colour you want them to be.

I believe U

LOL

This is a good way to increase post count

Though I'm not sure why would anyone do that

Sien ma.

And u just did by replying.

Agree.

Willing to pay 30% to get subsale to get full assessment of the area before buying.

Agree.

Willing to pay 30% to get subsale to get full assessment of the area before buying.

Imagine like batu maung where you get 30 foreign labor as neighbour

Replying twice to add post count
高招

internut problem.

it is a different group all together, cash buyers. got check how bad was subsales?

anybody has idea of the subsales appreciation for those property built after 2010?

after subsales, appreciation still ongoing? and transacted?

Appreciate from 30%-70%.

One of my factory increase 47% since vp may 2012. American coy tenanted. 15 yrs lease agreement. Not selling thou.

Another factory bot subsales in 07 increase 185%. Last wk buyer offered a historical high price in tat area but i rejected the offer. I'm comfortable with my rental income.

Tis 2 units giving me 57k rental. Instalment is 41k for both. Buy early. Enjoy the fruits.

Hav u decided yet???

wow merely collecting rentals is better than any other business..

i had, but the said property got land slide problem..

high cost/ high end property start emerging in auctions. i believe it is preliminary sign that bubble is coming out.

hopefully this time is not as hard as before, but looking at property price, some people might really hit by next bubble.

he buy when many claim the property bubble ma.. now he deserve such punishment..

just to make my self clear again?

developer= 350k
subsales 1st hand to me= 560k
me subsales again = 30%, around 150k minimum
so i sold it at = 560k +150k= 710k?

from developer to 1st hand subsales= period of 3 years or 4 years to sell at 560k
from me subsales to subsequent subsales = also around 3 to 4 years? at 710k?

harsh words punishment, that is profiting..

41k monthly installments is not some "kicimiao" looking for investments..