Not sure if this has been addressed but i think the key trigger for a property slowdown - continually stagnant prices for landed and significant correction to condos is the fact that the period of low interest rates are now over.

Property prices - in PG, KL, JB since 2011 has been driven purely by increased affordability arising from a sustained period of all time low interest rates NOT from salary/increase. Sure people still have their jobs, but the fundamentals of property - economic and wage growth has not been supporting the level of prices we are at now.

The US fed reserve is looking to hike rates 4x next year, BNM has already stated that it was hiking rates - (many expect 25-50 bps next year which will result in 5-7% increase in monthly mortgages) and stated that it will continue normalising interest rates over the course. Leading up to 2020 effective lending rates will likely be closer to 6%.

So apart from the supply-demand imbalance, wages have to catch up to property prices on falling affordability levels.

I can go on with this, but my question ia...are asset holders due for a rude awakening soon with the end of a multi year cycle? and how long will the downcycle last considering we are stuck in a middle income trap?

Awaiting your insights :S

Generally agree with your statement except that currently lending rates are still low at 4.2-4.3% (post AFC effective lending rates were 6.5-7.5%). So i see rate normalisation as a trigger for a correction from current levels, which i believe is not depressed yet since both landed and condos are still unaffordable by the mass market (an indicator of this is housing price multiple of annual income, KV is now at 7-8x compared to 6x in 2000s vs acceptable rate of <5x)

On your point about ppl holding on to properties in downcycles and subsidizing rent - i think it is just bad investing to do so without knowledge of time value of money, portfolio management etc. Property is an asset class like equities, bonds, gold and now even bitcoin (but lets not get into that), it should be sold when prices have peaked and reinvested to other assets which have bottomed (not back into other properties that seem to be undervalued). So i believe financial ignorance is the reason why most people invest in property, which is totally understandable.

""Leading up to 2020 effective lending rates will likely be closer to 6%"" - This statement is not an exact science but is based on some guidance by the fed reserve (not BNM, as they only give very short term guidance). The fed has given guidance on a 75bps hike in 2018 and a 50bps hike in 2019. While this might not be followed by BNM on a 1 to 1 basis it will most likely trail fed hikes by one or two quarters - or it will risk massive outflows from equities and bonds leading to a slide in the MYR which is already undervalued now - MYR slide will have knock on effects on importers and overall economy. So while BNM might stall their rate hikes its inevitable as we currently have artificially low rates.

A global finnacial crisis will make all of these irrelevant of course, and we are overdue for one since the last one was in 2007.

True, there is a hike in Dec for sure and market is pricing in a 50 bps hike for 2018 and no hike for 2019. Nonetheless, end of QE and tightening will affect us soon. BNM is in an unenviable postion of protecting overleveraged households while trying to keep up with the fed to avoid capital flight and the ringgit tanking to orchestrate a soft landing.

Anyway rate hikes def wont come before GE, after that we will prolly get hit by at least one rate hike in 2018 and 8% GST...time to back the greenback maybe

IMO..

One has potentially enormous upside (and unlimited downside) the other has only downside (although limited) over next 3-5 years at least.

On a risk-return basis both appear pretty bad investments at this point in time. Bitcoin operates in opaque market (nobody knows who are the major holders of bitcoin - it is definitely a cornered market held by a few big players - like small caps in Malaysia/Sg being gorenged till one fine day they cashout), highly volataile but with the potential to be the next alternative currency. ppl invest in coz 1) FOMO, 2) Greed or gamble - think of bitcoin as more of going to genting rather than buying an asset.

For property, i truly belive its a no brainer. property is a cyclical asset, it has been on the rise since post GFC till 2013 end/2014 (driven purely by low rates) where it has flatlined/corrected slightly due to various sectoral reasons (financing, suppy-demand mismatch, unaffodability due to exponential price increases vs income) but has not faced new marco challenges thare are just at the doorstep. Luxury to be hit first, mass market last.

Property developers do own their assets actually, mostly commercial and offices due to higher yields and rental tenure compared to residential. The also structure REITs

Property and land prices over the long term will only yield the same returns as economic growth as both are interlinked. Property is a non-productive asset, it feeds on the growth of the economiy but does not feed into economic growth and development.

Develperes have done well in malaysia (at least until recently) largely due to Malaysia moving from a low to middle income economy. Most of the large gains by developers are from infrastructure impovement (highways) and rezoning of plantation areas to resi or commercial areas. We see much less of this now heydays of developers in malaysia because of this is limited (which is why Malaysian developers are going overseas). Afterall, property is about location and execution is more about not screwing up the end product.

Not sure where you got 150k for a DSL in 1990 but its in Klang valley it was about 220k+- and now about 850-900k median price. On an annual return basis over 27 years that only gives you a return of 5% p.a. which is inline with Malaysias nominal GDP growth. For comparison, FD gives you 3.2%, govt bond 3.9% (very low risk) and Buying the KLCI 12-15% p.a over the same period. So long term property is a crap asset to hold.

True, if your are able to offload interest and principal repayment thru rental through out the period euity rate of return would be approx 13%. However, being able to rent out and have a positive spread consistently isnt a given. So lets say total equity investment through out 27 years is 100k annual return would be about 8.3%. Ok risk return i guess