here you go....the DDD said the same thing year after year. But crash never came. Any comment ?
Please stop reading if you're in property price will not go down camp. Take own responsibility if you still persist to go on. Don't blame the author for making your day bad.
Fact is the real estate market has slowed and the signs of further slowing is growing every single day.
Forget about U.S and E.U, everyone is tired about the gloom and doom there.
Better shape countries like Taiwan (don't argue, is a sovereign country and maintaining its own military), China, Korea and Australia face difficulty to maintain economic growth. For example, Australia coal, iron ore and copper export has slumped. For the past 6 months, Australia total home sale has dropped and recorded the widest drop in July 2012. Price in some second tie markets for high end sector (>AUD1m) has dropped significantly as much as -40% or more.
China fresh grad unemployment rate reached double digit this year (check Al-Jazerra latest documentary on China graduate). ZhuShanJiao 珠三角, Guang Dong Province (the locomotive of manufacturing hub in southern China), area like Dong Guan registered NEGATIVE -11 GDP contraction due to large numbers factories closure.
Though China official GDP is 7.1% but the reliability is quite questionable. China financial market is not reflective the entire picture because shadow banking plays a large part for the medium/small enterprises. Last year reports of massive shadow banks run begin to surface from WenZhou, ZheJiang Province which has alerted Wen to intervene. Australia, Korea & Taiwan export to China begin to contract in 2012 and China electricity production did not grow from 2Q, 2012. It tells us the situation there is not good at all.
Those in Malaysia who believe the property price can be sustained and grow (maybe slower) despite the economy gloom and doom around the world is living in fantasy.
Property price can only be sustained if you and me, brother/sister, your friends and enemies, good or bad neighbor, untie and uncle.... ALL, is able to continue paying the installment and rent on time to bank/landlord regardless of how bad the economy will become. The market really don't need many people failing to do their commitment for destruction the working of the financial chain.
Fictitious case. Just for illustration. A 3 years old condo with 400 dwellings. All in one size 1000sf, bought all in one price RM350k (now market price is RM500k) and 80% of them bough with 90% bank loan. When recession hit, 2% of them losing job and 3% of them have pay cut. So, 5% of them have problem to repay installment. 1% of them have saving while 1% of them, family can help out. Then left the 3% under water and foreclosure is inevitable. 3% is equal to 12 units of houses, is now on lelong. Let's say the lelong price is RM500k and under such economic downturn and large number of lelong is available, finding taker posses its difficulty. So, auction price has to be reduced, say, -10 to RM450k. If a different owner, financially better shape, want to sell his property now in an open market, he is not likely to find buyer at RM500k. Like it or not, RM450k is the realistic price (if there is taker of the auction price at RM450k. If not, further reduction is expected). When only half of the auction houses are able to sell, the remaining 6 will be further reduced. What if after further reduction, still no taker? Well, banker has to shoulder the liability without cash flow. When the vicious circle spread, it will force the market to raise interests rate as bankers now is facing reduction of cash flow. When interests rate adjusted upward, we can imagine the the ugly picture followed To believe the property price can be sustained or rise is equal to believe all the parties in the chain can do their part without failing. All of us know very well, it's not possible.
When the export drop which is happening now, the affected companies is going to bite the bullet and under such circumstances, the problem of laying off surplus labors and suppliers is inevitable in order to survive. Chain effect: our neighbor working in those companies and friend who is supplying the material to the companies and our government who collects tax from those companies. People spend less and .....
It is a tough time ahead, friends.
Obama is trying hard to reelect in Nov 2012 and he, as well as Mitt Romney will try their best to win voters than curing the economy (U.S has just reached 16 trillion deficit 2 days ago but who is talking it now? Still remember all the huhu-haha in Aug 2011 when deficit hit 15 trillion mark?). Angela Merkel will face the same as Germany election going to take place by latest of next year. China, just settled the recent largest political scandal involving the influential Bo Xilai, make no difference. China main focus now is the 18th National Congress of Commuinist China soon to be held. Who will take charge after Hu/Wen will be decided. Thus, it can be speculated that those politicians are buying time time for the moment.
Were there any property development recently been sold out on launch day? I reckon this is maniac behaviour, when everyone rushes to one asset class and afraid of being left out, isn't a sign of bubble top?
I presume many property investors are on teaser/low introductory interest loans. They are hoping to flip the properties within the low interest period and make a handsome profits. When everyone thinks the same, do you still think you could find the next greater fool to get a mortgage he/she can't afford to buy your overpriced properties? I have a feeling the pool of greater fool is running out very soon. Any thoughts?
The US had just been downgraded to AA+ by S&P few days ago, who is going to buy their treasury bond? I think their central bank the FED will step in and announce another round of money printing QE3 very soon, and the European Central Bank is going to print money and buy the Italian/Spanish bonds as well in order to avoid debt default. It will be an inflationary depression. Petrol, corn, grain, cotton, everything will go up in price... and you think property could cope inflation? Yes, but not overpriced properties for sole investment purposes only. When people are struggling to get food on the table or fill their gas tank, do you think they will be interested in flipping houses, upgrade to a bigger mcmansion.
Eventually interest rate will have to go up to cope runaway inflation. I suppose your parents in 70s/80s would have experienced mortgage rate more than 10%. Ring your bell? Because we had runaway inflation in late 70s/early 80s due to high money supply expansion for the Vietnam War. When the mortgage rate goes up or teaser loan reset kicks in, how many flippers could service their mortgage debt when rate is at >10%?
I really hope our Boleh Land will not experience property wreckage similar to US, Ireland, Spain, Dubai, Japan... Folks, the storm is coming, the world reserve US dollar gonna collapse, high inflation will hit our shore very soon.
At the end of the day, median house price will have to match average household income in long run, without the matching income who is going to service the mortgage debt? When running out of greater fool to get a bigger mortgage to buy the property, the music stops, the property bubble will burst... because the flippers haven't got enough income in the economy to service the mortgage debt. Falling total housing loan size is a prelude of falling housing market. Did the size of total housing loan grow in the last few months?
Nov 28 2014, 06:50 PM
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