The 1st rules of property investment is location, location, location. If the location is good, then the price will not drop but will still increase. Proeprty in Bangsar and TTDI/ Dsara are good example. Everyone seems in the buying mode now, many newly launched properties are easily being snatch up even b4 the officially launched.

The first rule in RE is not to buy at the top of the bubble!!!!

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Added on December 17, 2009, 5:54 pmThe second is when interest rates are at the bottom RE is typically at the top!!!

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Added on December 17, 2009, 5:55 pmWhen interest rates begin to move up, RE will move down!

This post has been edited by Onemorething: Dec 17 2009, 05:55 PM

Bubble? Now? Sure thing. Its so obvious. But this is the starting of the bubble. Past 20months interest rates were historic low. Imagine Bukit Jalil area can go for RM400/sf! Damansara Perdana RM400/sf. Million ringgit terrace house in Desa Parkcity. New launches were sold out fast.

New launches will be benchmarked against previous launches and it can "only" get more expensive now. Bank loans are stable. I don't forsee a BLR hike in next 6 months at least. So the bubble will still grow. Till when? Its the million dollar question!

So lets ride the bubble. But make sure we get out before it bursts. Now's just the starting! What is expensive now will only get more expensive.


minolta

Totally agree with you bro,

Just bought a still under construction project with 3 years completion time. How to get out before it bursts got stuck for 3 yrs?

This post has been edited by countdown: Dec 21 2009, 07:44 AM

Don't worry bro, I am also in same boat,

As long as BNM maintain the BLR, the bubble will not burst, but price adjustment here and there surely happen.

Those crazy thing like BLR> 10% and buying condo free apartment thing in 1997 will be in the history book forever.

None of us will be able to time the the deflation of the bubble so you must take profits now. When it pops, everyone will be trying to sell and it will be too late. Those on the sidelines with liquidity will reap the benefits as always.

Take the HK market now, the government stepped in again to limit loans to 40% down instead of 30% down from the bubble heights pre crisis where you could actually put 5% down. This was to hold off the bubble growing in HK but has failed as RE investors have moved to the secondary market and picked up more RE.

The herd mentality is alive and well in RE and this is the only sign you need.

1/RE prices are only high due to cheap money
2/A small increase in rates will be enough to stop the growth in RE and begin the downward cycle
3/Sellers will start dropping prices to take profits starting the spriral affect
4/Banks will start tightening lending practices
5/Rates will rise a quarter to half percent each quarter and RE prices will dive

I believe that single family homes in prime locations in KL are over priced by upto 30% on asking. I expect that in the next 12-18 months this 30% will not only come off but another 15%+ given the above changes.

We are actually lucky in KL as the bubble is only a small one unlike SING and HK, or VANCOUVER/TORONTO which can correct by 50%+ down the road. Also expect a very long flat recovery 5-7 years and the power exchanges hands from the west finally to the east.

On the flipside, KL is a unique place to be right now, given the US is still trying to bankrupt the rest of the world. Japan stuck in QE for another decade along with UK and EUROZONE. CHINA is the wildcard right now as they have their own issues! Canada is in the biggest RE bubble on record ready to pop before or after the Winter Olympics and AUS/NZ should be also taking a double dip when the US does.

I refer to this whole period of time as the GREAT GLOBAL RESET!

If I were you, I would be sitting on the sidelines ready to pick up great opportunities of a lifetime!

Onemorething,

Interesting thoughts altho I might partially disagree with your gloomy views. Can elaborate further :



How does one know if we r in the beginning, middle or end of a bubble? using SG as an example, the average property prices in early 2009(when sentiment is at its worst) are still much higher than pre-bubble prices (pre 2007).

Whats the point of letting go now the same property will cost more than what you sold for today even if the bubble burst?

Its the opposite in MY now.....

Agree.


I disagree altho we might have diff interpretation of what makes a "prime" location.

Historically even during 1997-98 asking priced dropped by maximum 20%. A 45% drop as per your estimate will create a bloodbath we've never seen before, and by that time we'll see flying pigs, cow will talk, and cats will grow horn.............................

Basically not gonna happen unless we're talking about selected highly specualtive areas with no fundamentals values driving high prices....


If the power exchanges hand from West to East, we'll benefit right hence the notion of flat recovery is contradictory.

I sure hope u r right.

Depending on your take on global outlook, and your overall investment strategy, but my personal view are:

1. The opportunity of a lifetime could be now, could be 6 months ago, and could be 18 months later. Bottomline, no one knows. I have a concerned who warned me in 2006, 2007 that a recession might happen in 2008 or 2009. And true enuff, it did happen in end of 2008 and early 2009.

Did property prices dip ? Overall I dont know for sure, but I've been eyeing at least 10 dev during the recession period and guess what, none of these 10 developments reduced their asking prices back to 2007 levels. The worst stagnant, and few even increase in prices..............................

Back in 2006-2007, my concerned friend's networth is at least 5 times more than mine (he was a lot older and he was my boss btw). Now, at best we are on par ( I suspect Im doing better than him now). I take it as my reward as I refuse to sit in the sidelines waiting for something that might never happen .........

2. Anytime is a good time to buy, as long as the numbers and fundamentals makes sense. You cant reduce risk 100%, but you can dramatically reduce risk by sticking to the fundamentals.

Hi Onemorething and Pai,

1. Actually - the destructive party in the USA is still not over yet. If u see recent stats, prices of homes in Florida, Nevada, Arizona and California is still expected to come down by at least 30% in the next financial year.

2. The bubble in the US was devastating. 23% of Home loans in the states are in negative equity. 1 out of every 12 homeowners are hard core delinquent or in the midst of foreclosure. In M'sia - you don't see these kind of numbers yet. M'sia's delinquency rate is approx 20% of the US at the moment.

3. It's nice talking about the global landscape, isn't it? But how does this affect little old m'sia? My opinion is that we'll just scuttle along with 3 to 4% GDP growth and pretend that we can be a "high income" nation by 2020 or whatever. One thing's for sure - like most asean countries, M'sia was far too dependent on exports - which caused us to be hit. We do not have a clear economic proposition whatsoever. This is different story.

4. Assuming this pathetic scenario in point 3 above happens - I do not see PRIME LANDED RESIDENTIAL properties being hit whatsoever. Can u share with me which areas u feel are overpriced by 30%? Before I become too "cheong hay", let me just explain briefly - the demographics of residents or buyers in prime areas like damansara, ttdi, bangsar or bukit d'sara are very different from the rest of country. Number one, most of them already own the friggin place. Number 2, most people that buy it are affluent or old farts - and they put substantial downpayments of 25% or more. They definitely do not take housing loans of 30 years. And most of them do not buy to feed their speculative fantasies.

6. Anyway, most banks have already tightened policy. Some banks do not even bother focusing on the mortgage business anymore. What type of margin is there to earn from BLR - 1.9%? The bank loses money for the first 5 years! They are HOPING AND PRAYING u will break the lock-in period so that they can charge u penalties. That's why most of those idiot banks have finally woken up an agreed to "standardize" their pricing for the time being.

7. But I do agree with you on one point though. There's heavy speculation in the air in certain areas. Certain banks are very very very very concerned about the 5/95, 1/99 or 2/98 or sexy financing terms they have just created. It's obvious that some buyers are just buying for speculation because their holding cost during the period under construction is negligible. If the economy turns south, or the unemployment rate rises by 5%, or whatever - our own mini subprime will be created.

8. I won't promote which areas I invest in lah. After some people come and hantam me. Agree with Pai that there's so much room and opportunity for investment, and anytime's a good time. Ok bye.

US housing came down because of subprime loans, loans that were given out easily and worst, to people who are unable to qualify for these loans in the first place! These people are pure speculators plain and simple. They are flippers, hoping to buy many many properties, then fix it up and turn it around fast. The interest rates they pay for their loans are high, hence their inability to service even the interest should their houses fail to "turn around" fast enough.

There is no such thing in Malaysia. Loans are not given out freely. Its just been about 1-2 years where interest rates are lowest, but people still have to qualify for the loans. After 97, banks are weary. Sure, there are flippers in Malaysia, but it is in my firm believe that these are high income or that they have cash and ability to withstand. Rotten flippers are few and far in between. Most people who buy their homes in Malaysia have the ability to hold. Take these 2 places for instances

KLCC area: Prices have come down, but still above developer price. Price came down because rental demand slowed due to lesser expats coming in. Also, supply is increased with many projects coming online. But I can't think of a project that sold BELOW developer price.

Mont Kiara: Prices stagnated. Then went up again. Also with many projects completing and supply increased. Also, which project sold BELOW developer's price?


Freehold landed properties in Klang Valley. Prices did not just trend up, but it jumped. Demand is strong, very strong. I've literally watched Taman Tun prices go up every month.


Property still has a long way to go before correcting....unless some political upheaval, or war or catastrophic natural disaster or unreasonable interest rate hikes.

I think if we had a next drop price in properties, it gonna be cause by a double dip in the world economy. I feel much correction will be adjusted to luxury highrise only. Scarce area like BU and TTDI will stay.

nice to read all the expert comments!!
im getting a better understanding of the property market from LYN.

May I ask wat's the experts' take on the RPGT policy being changed to 'after 5 yr from purchase' as announced yesterday??

Did the initial ruling cause any dip in prices as investors try to sell b4 jan 2010, to beat the deadline??

TQ for sharing!!!

expect asking prices to be higher from 1st Jan 2010?

2010 is going to be a very difficult environment! If you own any asset, you need to find a buyer so you cannot afford to be overweight in anything!

RE owners are typically overweight on RE! If 40% or more of your net worth is in RE, then be very careful!

The double dip will occur and this will finally be a REAL, not a false bottom, occurance.

If Malaysia's dependance on exports continues, if the mortgage market continues to provide buyers with cheap money, then this is only the beginning or re-inflation of a local bubble - it will not end well!

The correction in RE that I have projected is in the highest end markets and while I do agree with a small demographic of buyers being older more affluent (may have owned these properties for a long time), are still business people and may be advised to cash out chasing higher alternative returns. Note, these owners have multiple properties and will need to sell 30% of their RE assets to service the remaining.

The others who are not in this camp will need to sell, especially when interest rates rise and they are unable to service their loans and/or valuations deminish downpayments.

I agree with the poster who mentioned us building a mini-bubble in RE in Kuala Lumpur. While there has not been the same loose lending here, there has been enough!

On the Global front,

Watch for another 18-24 months of DEFLATION! Watch for the S&P the next 6-8 weeks for all the downward indicators. Watch for a GREAT UNWIND with very little place to hide in 2010 except the USD Index.

The GLOBAL ECONOMIC PIE IS SHRINKING so watch this period of deflation breed potential runaway inflation. Then watch RE hit lows!

Theme for 2010 - The beginning of second great depression! USD Index 0.825 - 0.88. Dont look to the Bond Market! Dont look to T-Bills or GOLD.

Europe will lead, so dont own any EURO!

People are not prepared for any of this! My negative scenario is lower lows, my optimistic is a very sad sideways Japan style economy which could last a decade.

Either way RE in Asia will be negative due to many real and demographical forces, especially in the luxury segment! It will start in China, deleveraging will be name of the game.

Trades for 2010, stay on the sidelines, buy USD, watch for a dip in GOLD under 1000, sell off property, domestically I can only think of gov bonds and any strong bank and utility "divendend paying" stocks!

This post has been edited by Onemorething: Dec 27 2009, 12:58 PM

2010 is going to be a very difficult environment! If you own any asset, you need to find a buyer so you cannot afford to be overweight in anything!

If Malaysia's dependance on exports continues, if the mortgage market continues to provide buyers with cheap money, then this is only the beginning or re-inflation of a local bubble - it will not end well!

The others who are not in this camp will need to sell, especially when interest rates rise and they are unable to service their loans and/or valuations deminish downpayments.

Watch for another 18-24 months of DEFLATION! Watch for the S&P the next 6-8 weeks for all the downward indicators. Watch for a GREAT UNWIND with very little place to hide in 2010 except the USD Index.

Theme for 2010 - The beginning of second great depression! USD Index 0.825 - 0.88. Dont look to the Bond Market! Dont look to T-Bills or GOLD.

Trades for 2010, stay on the sidelines, buy USD, watch for a dip in GOLD under 1000, sell off property, domestically I can only think of gov bonds and any strong bank and utility "divendend paying" stocks!

[/quote]

such interesting pessimism too general info & lacking in gory details
the properties which i am watching so far, has only gone up
my pbb epf unit trust advisor, has told me, to wait for the market correction market 6 months ago, but it did not appear
also waiting to buy properties for rental income eg. around colleges setapak, bukit jalil & subang jaya or penang sentral
in meantime, continuing to rock & roll, go long or short
don't despair! put your money to work in USA example: ewm http://www.direxionshares.com/etfs
seek & u will find

Dec. 7, 2009, 4:19 p.m.
Inflation will not get out of control, Bernanke promises
U.S. economy on the mend, but has some distance yet to go

By Rex Nutting, MarketWatch

WASHINGTON (MarketWatch) -- When the time comes, the Federal Reserve will raise interest rates to keep inflation under control, Fed Chairman Ben Bernanke said Monday, adding that that time could be far away.

With the U.S. economy still very fragile and unemployment so high, inflation isn't a pressing problem right now, Bernanke said in a talk to a group of economists in Washington.

For now, getting the economy back on its feet is the top priority. "We have come a long way from the darkest period of the crisis, but we have some distance yet to go," Bernanke said, according to the text of his remarks released in Washington. Read Bernanke's speech.

"Significant headwinds remain, including tight credit and a weak job market," he said.
Riding the Rate Roller Coaster

With bonds fully priced, it may be time to swap into preferred shares, utility stocks and other investment that offer protection if interest rates rise, according to Barron's Associate Editor Andrew Bary.

Bernanke's talk was titled "Frequently Asked Questions." The most frequently asked question of the Fed right now is: Will the Fed let inflation get out of hand?

"The answer is no," Bernanke said. "The Fed is committed to keeping inflation low and will be able to do so." However, inflation "appears likely to remain subdued for some time."

Economists said there were few surprises in Bernanke's remarks. "His speech does not change our expectations that the Fed will stay on hold until early 2011," wrote Michael Hanson, an economist for Bank of America's Merrill Lynch.

While there's more chatter among financial market participants about the Fed's first rate hike, most members of the policy-setting Federal Open Market Committee have said it's too early in the recovery to consider higher interest rates.

However, Philadelphia Fed President Charles Plosser said last week that he believed the Fed should raise rates sooner rather than later, citing the danger that inflation would become entrenched before the Fed can withdraw the stimulus. Plosser has no vote on the FOMC until 2011. See full story on Plosser's speech.

Bernanke's remarks broke no new ground; he repeated the message he's been giving for months:

* The economy is recovering, but is not growing fast enough to create many new jobs. Financial conditions have improved, but small businesses and households are still having a hard time getting credit. With jobs growing only slowly, consumer spending won't accelerate, and neither will consumer inflation.
* To prevent a recurrence of the financial crisis, the Congress needs to approve new powers that would make sure Wall Street -- not the taxpayer -- pays for the next failure of a "too-big-to-fail" financial institution. And, by the way, the Fed needs new authorities as well to monitor the stability of the economy.
* The Fed, in conjunction with other central banks and U.S. agencies, averted "a global financial meltdown that could have plunged the world into a second Great Depression." Because of Fed support for the financial system, businesses and consumers have greater access to credit than they would have had, and that support is helping the economy to recover.
* Proposals to "audit" the Fed are a thinly disguised attempt to let Congress second-guess monetary policy decisions, and have nothing to do with the Fed's books or accounts.

Bernanke's remarks come just over a week before the Federal Open Market Committee gathers in Washington for a two-day meeting.

No one expects any major changes in policies at the Dec. 15 and 16 meeting, but observers will be watching for subtle and not-so-subtle shifts in wording that might provide hints about when the Fed will begin to reverse some of the extraordinary actions it's taken, including driving short-term rates to near zero.

Bernanke gave no hints about the timing of the Fed's "exit strategy." He repeated the judgment of the FOMC that inflation is likely to remain subdued and warned that inflation rates could even move lower.

"However, as the recovery strengthens, the time will come when it is appropriate to begin withdrawing the unprecedented monetary stimulus that is helping to support economic activity," Bernanke said. "We are confident that we have all the tools necessary to withdraw monetary stimulus in a timely and effective way."

Bernanke said the Fed will be able to tighten monetary policy by raising interest rates even before its balance sheet shrinks back to a normal size.

One important tool will be the ability of the Fed to pay interest on the reserves that banks hold at the Fed. If necessary to prevent the economy from overheating, the Fed could raise the rate it pays to banks in order to entice them to deposit excess funds at the Fed, rather than lending them out.

Reserves held at the Fed are effectively quarantined from the economy, and can't contribute to growth in the money supply or inflation.

Right now, the Fed's problem is not too much money in the economy, but too little. Banks are keeping those extra reserves at the Fed (and not working in the economy) because they aren't lending much and because they want to maintain high capital ratios.

According to the latest Fed data, commercial and industrial loans have declined by 17% in the past year, evidence that small businesses are still being denied credit.

Rex Nutting is Washington bureau chief of MarketWatch.
http://www.marketwatch.com/story/inflation...09-12-07-124100

Dont mistake pessimism with being a contrarian!

As for listening to RE Agents, Banks, Brokers, Financial Advisors, Economists and most importantly the US FED Chairman, who do you think created the bubbles.

There are only a very few I follow.

Malaysia like most will lag behind the these predictions so yes the bubble will continue here and herd mentality in tact. I would expect you have some more time before you need to sell.

How much time is the key, buying needs to be put off!

i dun specialize in economics & dun think dow index will hit 6000 again
also would not mind, put off buying for the moment
but i dun plan to sell any properties i own or invested, i hapi with the rental income
the property u currently stay or investing, where located? when u wanna sell? if below market value

Are you the contrarian or r you the herd? All I see here is that u r trying to time the market, and thats exactly what the general herd does

Timing is everything, isnt it! The long term strategy still applies to RE but not right now. To try and time any market comes from pure speculation and greed and one will never be successful at doing it.

I simply saw the original bubble coming around 2005 and took my RE profits and since the crisis have not seen any good opportunities in it.

I only buy when there are a few buyers, when rates are on the rise and a strong future rental pool for luxury properties.

I see the first two in Malaysia coming true in 18-24 months! The last one may take a decade to occur.

Without the 3 in place, i guess it will have to be my primary residence in which I rent to myself.