ROI and property value are "technically" 2 separate issues, my fren

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Added on July 28, 2008, 5:08 pmWhy do u want to refinance in the 1st place?

This post has been edited by Pai: Jul 28 2008, 05:08 PM

Read the lines my friend, I am still saying ROI.

This post has been edited by billytong: Jul 29 2008, 09:08 AM

today lafarge announce of cement price increase effective on 1st august...1 tonne @RM20...will property price drops? Will new property & used property boom up or down?

True, well said. Though it's always that fine balance between optimism and logic. Boundless optimism abounds among many a man, perhaps far more than deservingly so.

Good advice. Even if people don't take it, the economic downturn will sadly force many to do so.

yeah it depends on the location and developer as well
Developers like IOI, YTL charge you more for their houses/properties
Also noted that most of the properties advertised in newspaper are lousy one lah. Very far away from the city

http://money.cnn.com/2008/07/28/real_estat...sion=2008072913

Home prices drop record 15.8%
The S&P/Case-Shiller Home Price Index of 20 cities fell for the 22nd consecutive month.

All,

What makes you think that it will not happen in Malaysia too.

Dreamer

A lot of people will advise you to buy a cheaper property eg. apartment/condo 1st if you cannot afford landed properties. I think it's still better than paying rental monthly.

But bad news for those investors/properties owner, be prepared for bad tenants who never pay you rental during recessions

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Added on July 30, 2008, 8:17 amI should say the condition in USA is different from malaysia. They way they released loan is questionable compared to the banks here. So they ended up with a lot of bad debts.

This post has been edited by muscaa: Jul 30 2008, 08:17 AM

muscaa, in relation to tenants who don't pay rental during recessions, it depends on what kind of tenants you are targetting. if you are looking at expats, then that shouldn't be a problem. especially if they are working for huge companies, and those companies are paying the rent. the risk here is the expat being sent back home, and you losing the tenant altogether.

You will get the same effects on people that are over leveraging on their loan.

BNM hike interest rate, BLR up then come with economic slow down will make a perfect setup for people cant keep up with the installment.

yeah, i can sense the big bubble is going to burst especially those apartment/condo nearby KLCC. If recession starts, i wonder how many of those so called highly paid executives will stay&work in msia.

i agree with you, paying for your own property is way better than paying rent, you are basically helping the owner to pay their mortgage

Look into ur personal circumstances too in deciding to rent / buy.

If u can afford to buy, but have it planted in a worthwhile investment, then renting (for the duration of the investment) is ok.

Renting also increases your work mobility, enabling relocation for better paying jobs which also reduces your transport cost.

But if u buy a condo near activity centres, renting out your extra rooms might generate $ to set off your instalments etc - the best of both worlds ie. ur own place + income.

Listing the figures of both options out in a worksheet will make decisionmaking easier.

are you trying to compare our economy with usa economy ? i would say, it is inappropriate. or, are you saying we, malaysian are now in recession which related to the property goes downtrend ? again, inappropriate, which are based on my personal view. and please, dont tell me you have tonnes of relatives living in all those usa, uk, australia or all over the world , thus you have first hand informations. too add more, i personally live, study, and work in uk and germany for 10 years.

or, are you trying to convince everyone not to buy property rather than rent ? to me, i am more sort of as a typical chinese man, which buying a property is a cycle in life. come on, dont always based everything on figure such as percentage. the more calculative you are, the more miserable life you will be.

buying a property is basically based on one person's ability and thinking.
will the property goes up in value? more or less, yes, i would say, but, it will be slower compare with previous years.

a6meister,

1) Do you know how to discuss in a logical fashion?? Saying something is inappropriate does not make it true. You have to state reason behind your thinking.

2) In Malaysia, almost all housing loans are variable rate based on BLR. When we hit recession, people will be out of jobs. Then, they will not able to pay mortgages. The government cannot lower interest rate, if they do the RM will devalue and money will flow out. If they raise interest rate to defend RM, BLR will go up and even people that has a job cannot pay mortgage.

3) What makes you think Malaysia WILL NOT go into recession soon?? Our economy is only driven by the two OILS: Palm Oil and OIL. If the world hit recessions, both OIL prices go down. Malaysia will go down with that.

Dreamer

Cherroy,

To be frankly speakig, most of the time, which i can remember is, i agree quite a lot with you in many aspects of things. Or, i hould say, you indeed do make many good and solid comments regarding our economy.

But, regarding recession ? no, we are not in recession and is not in any near term as well. current high cpi, is mainly and largely driven by high oil price. now, the bubble had bust. people are just rying to be careful when comes to spending.

Yes, BLR is variable among all banks. but, the difference is just a merely 1 to max 2 percents. i always support lower low interest which also mean weaker RINGGIT.

crude oil, is indeed is our export, but i am not into this field, i cant comment much.

Palm oil, these few years, is the main export, which also take over semicond. i have 3 businesses. palm oil is one of them. I am a middle man and also involve in HEAVY WORK FABRICATION. Palm oil, to be honest, does not contribute much to our economy.

1. In any refinery factory, more than 90% of the employees are foreigners. we are outsourcing our cash.
2. some time ago, i tonne of palm oil is 4k plus, now it is just a merely 3k. and do u realise that, the profit margin for the refinery, which is also the main income of palm oil industry is ONLY A SLIM APPX 8%.
3. i BUY PALM FRUITS from the small scale planters, which about 30k tonnes to 50k tonnes a month, which this quantity depends on raining season. 3 weeks ago, those planters are paid rm 670 to rm 675 a tonne, now, yesterday, they just paid a merely 520 after all the tax and expenses, of course also after my commissions.

i can explain from the export of palm oil to dubai till the purchase of fertiliser of palm oil industry. the point is, palm oil, is our main export, but, not our country major income, and it bring more harm to our country rather than advantages. Only rich investor are profited from it.

Very simple, historically M'sia has never experienced such drop or even increase. And if u look properly, u'll see that NOT ALL location experience massive drop, and SF actually went up by 20+%.

Its all about picking the right properties.



Recession? We are far from it, at least for now.

My 2 cents on dreamer101's statement referencing a CNN article (and subsequent views).

The effective question was whether or not we'd think the same thing as what happenned in the US property market will happen here (and to the same extent).

2 parts to the answer.

1st part

The economies are different, and perhaps one would have to consider to what extent the sector is exposed. If you research the US property sector, and the US economy in general, you will find very high levels of household debt. As an economist, I can tell you the measure we are concerned about is the amount of debt per household - and really, how it varies over time. An economy run on credit always runs higher risks when the economy sputters.

In an economy where people are used to the notion of personal debt, this becomes dangerous when it's extended into leveraged asset purchases.

As part of my job, I sometimes handle cross-border M&A transactions. In one of these transactions, we discovered that the US entity we were proposing to advice on, was potentially engaged in house price inflation to pocket the cash (Scam involving loans extended on over-inflated house prices, and finding straw buyers). When you have an economy that's so debt-fuelled, coupled with speculative attitudes towards property, and with lax controls, that's when severe price crashes will occur if the bottom drops out of the market.

Thus, a conditional answer would be that it's unlikely for the same thing to happen to the Malaysian property market to the same extent.

I personally think the resiliency in the market will be the higher-end areas where the Middle East investors have come in. Our economy has made a strong push as an Islamic centre of finance. Some of my friends have financed and developed the properties in the KLCC area - do you know that take-up rates are phenomenally high still? The take-up is predominantly foreign. This is quite remarkable.

p.s. Side note, as an economist though, this does not bode very well for our country in the longer run. We generally want locals to acquire and grow assets, rather than foreigners. We should adopt Singapore policy and convert as many of these highly skilled, highly productive foreigners into locals. Instead we import Bangladeshis by the truckload, but that's an economics topic for another day.

You may see sharp price falls elsewhere in the market. If you take a drive outside the city, I am sure you still come across some abandoned housing / commercial development projects. My firm also handles some recovery exercises for these projects, and I can tell you that the Banks have been saddled with some of these for a rather long time, some since the last crisis.

2nd part

Dreamer101's statement, though, is interesting in a different aspect. There are links between economies - just to what extent.

I remember about 1.5 to 2 years back, at end-06, I received one of those international research reports (as part of my line of work). It was predicting the overextension of the US economy, the risks of a fall, and more importantly, the ripple effects. At that time, I had a number of furniture-related companies in my client portfolio, and I remember an interesting statistic. 50% of our furniture exports was westwards towards the US. Thus, this was predicted to be a sector with rather significant exposure in a US downturn.

It's interesting because now I am starting to see the effects being felt among Malaysian property companies, unlisted and listed.

Anyway, dreamer101's statement should serve as a reminder not of whether our market will fall to the same extent but that the continued slowdown in the US economy will soon lead (if it hasn't already done so) to slowing US demand for Asian products including Malaysia. BNM holding our Overnight Policy Rate constant will keep our growth rate (artificially so) at the expense of a higher inflation rate and weakening ringgit (Ringgit has recently weakened to new lows), thus keeping exports humming for awhile more. But exports won't hum forever.

If you want to know what our exposure risks are for the Malaysian economy, the likelihood of a downturn, do start spending time looking at which sectors are overly-exposed to US and european economies - particularly the US, the fall will be sharpest. If those sectors are large components of our economy, you will see the effects felt on a larger scale. When consumer demand falls off because of less earnings from exports, that's when the property prices will fall.

This post has been edited by Playbook: Aug 1 2008, 07:40 AM

we are having recession ever since the fuel price increase to RM2.70. With the inflation rate of 7.7% (my God, didnt our govt always say we have a low inflation rate of <4%?) and probably political instability, the share market is going down very soon.

Share market is going down very soon? We already have one of the worst performing indices in Asia

Pai,

Historically, Malaysia always have OIL MONEY to bail out companies during recession. This will be the first time in the last 30 years that when Malaysia enter recession, Malaysia has NO OIL MONEY to bail out. Given that 1.2 millions to 1.5 millions people working in government and GLCs, you think that will not affect the property market?? Malaysia has ONLY 10 millions people in working age.

In the last recession (97/98), most and if not all those people were not affected.

So, be careful. Do not be so confident about your outlook.

Dreamer