QUOTE(irene_star982 @ Jul 15 2015, 02:07 PM)
I wonder when negara bankrupt ....property price will come down or not???
Maybe that time only can afford to buy house.....
House price so expensive these days.... how to buy???
This will likely happen only in a persistent deflationary environment.
In my limited knowledge, if a country defaults, it is more likely that hyper inflation would set in. However, a period of deflation could already have preceded the sovereign default event (sovereign defaults play out like a really slow train wreck).
It is important to see hyper-inflation / deflation as a separate event from a default. Whether the deflation prolongs or hyper inflation sets in depends on certain economic events and levers such as capital flight, capital controls, forex restrictions, currency valuations, ratio of local to foreign creditors etc. It is situational.
1) If a country goes bankrupt (technically, it is insolvent rather than bankrupt) AND the currency subsequently devalues to nothing, the country is likely to experience a period of hyper inflation (in local currency terms). This is the upward pressure created by the eroding value of currency compared to fixed assets. People would rather hold on to their hard assets than to hold on to RM. "Want me to sell you my house? only if you pay me 10x what it was yesterday la!"
2) In an insolvency, write downs and some destruction of money happens. What this means is that the total amount of money circulating in the country (for locally held debt) suddenly becomes less. When there's less money in circulation compared to an amount of goods that is constant, it creates a downward pressure on prices. If the Ringgit's value somehow can remain unscathed after default, this scenario could happen if a majority of govt debt was held locally.
3) Which scenario happens depends on the mix of measures taken by BNM (E.g. Print money, currency defense, capital controls, restrict access to forex) and also market reaction to the events playing out.
4) Finally, it could all still be irrelevant for house prices. Because the because people could insist on being paid in USD or some other stable currency, which makes bench marking against existing house prices obsolete.
I hope you gained something from my explanation. There really is alot of knowledge to compress into one reply.