QUOTE(Showtime747 @ Nov 9 2014, 05:09 PM)
Is it "over" leveraged ? I don't think so. I have explained a few time why the consumer property loan is not "over-leveraged" but is caused by innovative loan packages
The rapid expansion of property loan is due to 1 factor --> zero entry + dibs. And this new way of buying property has created new demand that shift the equilibrium to the right. Ie. price increase. The demand comes from 3 new categories of people :
1. Gen Y
Previously, only people with cash equivalent to 15% of property price can buy. So younger generations aged between 22-30 hardly can afford to buy property. They have to save for years. During my time, we (Gen-X) bought our property only around 30 y/o. Even if our salary is RM5k, we can't buy property because there is another barrier --> 15% deposit. We have to save enough only can buy. This takes time.
But with zero entry + DIBS, the developer and banks have made owning property a lot easier for Gen Y. They do not need to save for the 15% deposits. As long as they have a job with good salary, the banks can loan them. This is not possible before. So, a new category of buyers (demand) is "created"
2. Female Gen Y
Previously, there are not many girls get education up to university. Nowadays, girls and boys get to further their studies if they are smart enough. So, together with the zero-entry + DIBS, the female property buyers have become another new category of demand.
Worse, even fresh grad boyfriend+girlfriend suddenly can afford to buy property jointly right out of university age maybe 22-23. That's why we see at the new launching so many young chaps. So, another new category of buyers (demand) is "created"
3. Parents
Previously, Gen-X (35-50 y/o) after buying their first property, they keep their investment in FD (high interest), stock etc. But due to zero entry + DIBS again, these parents find it easy to buy their 2nd/3rd property too. They don't need to start saving the 15% again after the 1st property.
When they see the prices keep increasing, they feel that it is their responsibility to buy for their young children (although they are only <10 y/o now). They thought if they don't buy now, their children are not going to afford. So nowadays, you will see Gen-X own >1 property. For the sake of their children 20 years later. So, yet again another new catetory of buyers is "created".
So here is the important question - are these loans given to the 3 new categories of people vulnerable (ie sub-prime as our student likes to put it) ?
I don't think so. They have the job that pays well and their instalment is affordable as long as they have the job. For Gen Y, they are at the stage of climbing the corporate ladder and their income will only increase fast over time. For those joint name purchase, they can even consider 2nd property after 2-3 years.
The "culprit" is "zero-entry + DIBS" which allow them to bypass the second hurdle of saving 15% deposits. Before, it was a major hurdle for Gen-X to save the 15% deposit. But not Gen-Y. As a result, the property price increased so "abnormal" for the past few years.
Of course, if economic crisis happens, recession will hit everyone. Borrower who lose jobs will face problem of servicing loan instalment and it will lead to property market downturn eventually.
But do you honestly think economic crisis is coming ?
How can you say we are not over-leveraged? Msia is 86.8% household debt to GDP. ..which include prop, credit card and car. Still, this is a measure of potential cashflow problem. When you default on your loan ... 2 things out of 3, banks can tarik: prop & car. And car depreciates so the real asset is prop. This definitely will affect prop market when foreclosure is rampant. My definition of prop burst is foreclosure spread like wild fire.
It's good analysis you presented above on Gen Y (male & female), Parent factors, 15% dp and Zero-entry + DIBS. And I agree with you. However, you also pointed out prop price keep increasing and ppl are worry not be able to afford in future. Developers, RE agents and flippers use this FEAR as their selling pitch ... and they dare push the price higher. I have no problem ppl making money. I'm in no position to question moral values here. And this thread is not for moral discussion.
PLaying on this FEAR get ppl buying even though they cannot AFFORD. Pushing their cashflow to the limit. Flippers may make their money but the MOST IMPORTANT point is price increase on THE SAME PROP that changed hands many times around got "hotter and hotter". The final person (FP) whom took up loan and holding this hot prop is like a timebomb. Interest rate increase will work badly for him. Or when his income cannot cover the installment.
THere are many FP in the market now. When times are good, they assume it will continue. But how does the good time come about? Msia is commodities driven export country. .. O&G, palm oil, rubber while manufacturing had moved a lot to China. Did we create anything new ... smart phones? Electric car? websites like Google? Alibaba? Lazada? Answer is NO.
So where does this EXTRA prosperity come from? PRoperty Boom.
Can we agree there's property boom in Msia on the "abnormal" price increase?
Prop boom is possible when banks loosen the money lending... as mentioned by you abt waiver 15% dp and "zero-entry + DIBS". So if banks tighten their lending, the party is over. Do not have to wait interest rate increase. Many industries within Msia enjoyed this boom will suddenly feel business slows down when flow of money into market slows down. FPs will get less bonus, pay cut etc... lucky if they don't lose their job. This include the gen x & y you mentioned. This will affect their monthly installment to .. prop, car and cc? YES.
And all this boom time comes from borrowed money. This is how we got to 86.8% household debt to GDP. Do I think economic crisis is coming? YES ... but don't ask me to predict the timing bla bla bla ... bcoz that is bullsh!t. If i'm good at predicting, I might as well predict 4 digit toto.
This post has been edited by HuiChyr: Nov 10 2014, 12:14 AM 
Nov 5 2014, 03:53 PM
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Macam ada banyak udang behind the batu woh....ada apa 
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