Anyone who are in the industry knows that currently, the transaction prices displayed on brickz databases are showing SPA marked up prices.

But everyone have to cari makan. So, continue the status quo

Now, the bigger question is, what will happen to the collateral in our banking system? How to truly value the collateral in order to balance the asset Vs liabilities in our banking system?

What about individual and companies level? What will happen when they are unable to liquidate their properties at the market value to match their liabilities ?

Any expert opinions on this?

What will happen when they are unable to liquidate their properties at the market value to match their liabilities ?

In this situation, the seller has to immediately fork out cash to offset the price difference after signing the SPA

The banks themselves set the valuation of the properties. The market follow. The banks will give margin based on max 90% or 70% if 3rd house and more. Banks already mitigate their exposure. More important is the ability of the borrower to service the loan.

Property is long term investment or ownstay, it will never be a tool to liquidate for liability immediately, at least wait for 5year. 6th year is better based on current rpgt policy.

So a lot of thing will be changed in this 5 year, and the property price may increased in this 5 year.

so after 5 year, it may fitted the markup price, then its became balance.

Mostly people doing mark up is not want to earn the cash out money (majority). They just want to make the transection smoothly.

Its the best the mark up price overflow money can covered the 10% downpayment + Legal + stamp Duty fee etc. (basically like new project spa price).

Holding power in property investment is a key factor, if you have great holding power, you not rushing to sell your property, then you can sell it with inflated price (but at least need to make the effort to make sure property in good condition). In reversed, then you are facing the problem like your question.

This post has been edited by Aldo-Kirosu: Nov 23 2023, 02:01 PM

You're assuming property prices will always go up. What if it goes down? You can see that happening already as soon as buyers get their keys from developers

U only need to know bank never lose money one .

If they lose money , they can always sell the asset to another SPV guaranteed by Bolehland.

Right product alway not problem in this matter, especially landed / ownstay property at Klang valley.
If its investment property, then it will be situational, based on the due diligent, knowing the market, trend, and etc. Investment property alway need to bear higher risk than ownstay property.

Why ownstay property have higher sustainability? because their logic is used their current rental money + a little bit force saving money to pay the installment. so they stay by themself, that why less risk involved, then less auction unit in market, then price can be sustained, then property value can be appreciated in long term.

Your latter statement applies to new project market, not the subsales market.

For new projects they have a term named end financier (EF) which means the bank accepts the selling price of the new development, and is willing to open door for business to the developer customer (which means loaning to the buyers). Hence what you're looking at to loan is a margin of up to 90% loan of the SPA price (depends on your LTV and risk scoring, some banks will slash margin on high risk scoring). The ultimate keypoint here is the "SPA Price", which the bank accept it as the value for all under development projects "justifiable" by putting in future value in valuation. You are saying prices go down when VP, most of them are true because the SPA price that developer factors in is already a future value & risk absorbed during construction period, which the price did not actually reach when the project completes. But I do see a few projects have a on-par or higher value than what was previously transacted during the initial sales. It all comes down to the valuation, as well as the market acceptance (this drives the true market value).

On the other hand for subsales, its all on the bank's panel valuator to give the final valuation, and from the valuation value they can loan you up to 90% (again, base on your LTV and risk scoring). The loanable value in bank's mind is never the SPA price, but the valuated price. Mark-up can be done only if the valuation of the property is way higher than the proposed SPA price.

This post has been edited by Angellynx: Nov 23 2023, 02:58 PM

It is not something new and bank has covered this risk in its process with comfortable tolerance level. Technically the foreclosure is the immediate process for bank to recover a non performing loan at maximum magnitude, any shortfall will be recognised as losses and bank need to deduct with provision fund. Our banks are closely monitored by BNM and they are well capitalised so no systemic risk will happen at the moment. Not to say the bank were forced to apply strong risk management framework for monitoring its risk, it is not the simple 1+1 formula, robust and comprehensive statistics plus ratio analysis are in place, like how insurance company always make money in life insurance business as long they don't overtaking the risk.

So why bank allow for inflated loan? Partly because of the LTV explain by other forumer. But more importantly, bank only willing to take risk when they bet the person has stable earning ability and able to repay the loan. This can explain why a youth with 30 years old and with stable income is easier to apply for loan as compared to a elderly who are 60 years old with no income (retiree with high net worth different story, but they don't need to borrow and leverage too), bank can give a lot of nice terms for justification, but the main and the only point is that they bet the 25-40 years old youth will surely repay the loan in long term, so even if the person's property was forclosed below his loan outstanding amount, the shortfall will still be tagged to him as liability, and in one day, he will have to repay. Of course he can choose not to repay and go bankrupt, but big data show majority Malaysian are still good pay master. That is why you see banks' loan portfolio amt are growing steadily together with their profit despite Malaysian household debt are high.

This post has been edited by Jingle91: Nov 23 2023, 05:17 PM

All sounded right and nice. Let's see what happens when OPR get back to 5%-6%. All the assumptions go to the drain.

Why not, but before that need to wait until opr rise to 5% -6% like you say, before that your conclusion is also an assumption only in your mind

This post has been edited by Jingle91: Nov 23 2023, 09:06 PM

I know in some cases, bank lose money. Foreigner mortgage loan. very offen see in auction market.
Without MM2H = 70% loan
with MM2H = 80 to 85% Loan

case 1: So if the foreigner back to their country and left the home alone and never back malaysia, bank cant do anything to them.
case 2: Bulk purchased, cash out huge amount of money, migrate to oversea, left the bank bankrupted the defaulter, but so what, he are not going back to malaysia, so doesnt matter.i dont know other aspect of make bank lose money, but in real estate, this is what i see bank may lose money scenarios.

Those case u mention bank also don't lose money one .

Usually for our bank to accept foreigner as customer, their due diligence will be on highest standard due to foreigners will be auto categorised as high risk customer, and he or she must provide solid document to prove his domicile country and certified by professional body. And of course must be from low risk and rich country, haha. The origin country is important, and they must provide proof for having enough assets registered under their own name, before they can apply loan in Malaysia bank.

So even if the person go back to their domicile country, for sure the bank can file law case to suit them at their home country, the person is either pay back the loan for bank to withdraw the case, or proceed in court and go into bankrupt, so local bank can claim back from his liquidator, which will be very unlikely situation. Hence the person is impossible to run away from debt intentionally and continue enjoy life in home country, unless in unexpected situation, like he is really bankrupt in short time and all assets already claimed by other creditors, so the Malaysia bank will have to recognised this as bad debt as losses, but if the person want to clean his name from bankruptcy list, then he must repay the bad debt to Malaysia bank first, for the bank to withdraw the court case.