yo....u must compare their population also ma

Affordability is still measured (orginally by the banks for what you could qualify for in a mortgage) at 3.5x. In the 70's/80's in NA is was 2.5x. In the 50's it was 1.7-1.8x.

For example, if you had a family income (husband and/or spouse) of $60k USD, then you could qualify for a mortgage of $210K USD. If the home you were looking to purchase exceeded this amount the difference had to make up with a downpayment.

Seems pretty simple but worked for many years but usually guaranteed (under reasonable interest rates) that the family had ample funds (with max of 33%) of before tax income going to the mortgage.

Now for instance, in Vancouver which is the highest in the world. The factor is approaching 10x income. A family making $100K US per year needs to spend $1M USD to get a nice home.

The only way they qualify is new bank programs and lowest ever rates. However if the rates go up, say on a varialbe rate which is the cheapest, the cost of that monthly payment could rise substantially. Right now the variable is 1.8% in Canada, the fixed 5 year is 3.6%. The banks have been providing mortgages with no room for change, either if property drops OR if interest rates start to go up the owner typically locks into a 5 year fixed.

In Malaysia, IF the avg. buyer does make Net RM3K/m the calc. is RM3,000 x 12 months x (factor) = RM 250K-500K

If a senior person makes RM50K/m then affordable at 3.5x is RM2.1M.

The western world has gone on a 12-15 year period of credit expansion. It has made for a very unbalanced, overextended, non regulated environement. As you can see, many of these countries have major soveriegn debt and bankrupt. Something has to give and that is why the markets crashed in late 2008 early 2009. Stimulus only propped up a dying economy and now we are about to revisit what happens when governments throw good money after bad.

The first sign was the high tech bubble and it should have been stopped there however governments and big banks went all in again and formed the RE bubble. This is the last straw and why you will see major asset deflation througout the western world. Things are very uncertain about China as well as with their current RE bubble and exports going nowhere, it has no place to hide either.

The way this will play out is home prices will continue to slide for many years. Many say it will take another 5-7 years to find a bottom in USA in which the avg. price of a home will have dropped by close to 50%, now at 33% down.

Cities in the USA which ran 7.5x-8x factors are now around 4x, and if the slide is true, 2.5x is not far away.

---

Added on July 2, 2010, 8:15 amThursday, July 01, 2010

How Long Does it take for the Average Chinese Worker to Buy a Home?

For those who claim there is not property bubble in China because of strong demand, let's take a look a home prices to wages starting with a simple question: How long does it take you to buy this home?

In the traffic congested city streets, an advertiser was busy handing out flyers for the newly constructed condos. “Beautiful homes, starting at 29,800 yuan per square meters”, one flyer ended up in the hands of a cab driver who was waiting in traffic. He looked at the flyer and thought “It takes 125 years in order to buy this home”.

A young man got into the cab and picked up the flyer on his way to work. Up in the elevator, punched his time card at exactly 9 am, he rushed into his cubical to start his day of work. Then he read the flyer and thought “It takes 87 years to buy this home.” Foaming at the mouth, he threw the ad into the trashcan.

A cleaning worker lady at this company picked up the trashcan and also saw the ad. “It takes 255 years to buy this home”, she broke into tears.

While the homes are still being constructed, a construction migrant worker of the homes picked up the ad. Looking at it, he thought,“It takes 514 years to buy this home”, blood dripped down under his helmet. Buried in this thought while working on the high rise, he slipped and felt from the building…

A home that costs 29,800 yuan per square meters triggered different reactions with people of different social classes in China. What (or how long) does it take to buy a home? Cab driver needs 125 years, white collar worker needs 87 years, cleaning worker needs 225 years and the construction migrant worker who actually builds the homes needs 541 years. But the big boss only needs 5 days, and the mistress he keeps only needs “a nudge”.

The idea that strong demand proves there is no property bubble is nonsensical.

There is always demand at the peak expansion of a bubble. There was strong demand for Florida condos in 2005. Indeed demand was so strong people were entering lotteries and standing in line overnight for the right to buy one. Demand was so strong prices were going up every day.

Instead, look at price vs. wages and price vs. the cost to rent. Certainly price vs. wages is astronomically out of line.

Here are a few more links to recap the situation:

June 25, 2010: Gold-Diggers in China say "Show me the House" - No House? No Car? ... No Marriage

June 15, 2010: Stephen Roach says China's Housing Boom is Not a Bubble; I say "Nonsense"

April 3, 2010: Email from a Chinese on China's Real Estate Bubble

The bubble in property values in China is immense by any rational measure.

Mike "Mish" Shedlock
http://globaleconomicanalysis.blogspot.com


This post has been edited by Onemorething: Jul 2 2010, 08:15 AM

New Impian Meridien just been handed to owners. The place is going to have an upper hand with really good tenants taking the commercial lot, condo at 8th floor unique high ceiling (excellent for ventilation n family) which can be added with new mezzanine floor. The club and sky garden is fantastic. you can have a wonderful view there. The swimming pool, gym, children's play ground, tadika centers at very convenient.The rent for the place is slowly going up and once the LRT starts on November in front of summit, the rent will begin to start to rise at faster pace.I have an office n condo for rent. I am the owner, so if you know of anyone keen to look at them call me at 0162827996.

---

Added on July 3, 2010, 4:09 pmBy the way, a condo unit at Impian Meridien just been rented between 2k to 3k and its unfurnished had recently rose from 1,5k to 1.8k going to 2k unfurnished. The security system are going to be tight once they start tenants with the card and its will be very good for famillies. The hypermarkets like mydin, giant, summit shopping complex, bus transfers, segi college, mahsa are all located very strategically.It will be the icon of USJ high end living.

---

Added on July 3, 2010, 4:10 pmone unit was sold at 500k just recently to singaporean, another 400 and 340 smaller unit were also sold.

This post has been edited by mikey123: Jul 3 2010, 04:11 PM

Great read

I especially like the following :


Instead, look at price vs. wages and price vs. the cost to rent. Certainly price vs. wages is astronomically out of line.

This means as of today, our MY's factor is at 8x.........

China RE is expected to dip in price after china tried to flaten the property buble. Here is the link:

http://e.nikkei.com/e/fr/tnks/Nni20100705D05SS021.htm

To determine whether there is such a bubble, you can ask yourselves when you buy a house what is the reason?

1) Because the RE intrisic value is reasonable.
2) Because the　RE probably raise price.

For （１）there is no bubble. For (2) there is a bubble..

Is the crisis hitting us soon?

Why say so?

crisis? wat crisis?

Don't you think it's almost impossible to buy a property under Rm250k, limited on under RM400k? How much is a person under the age of 30 earning? RM5 to RM10k? It's ridiculous on the salary vs prop price.

So many high value projects, especially on the recent launches, were fully snapped up. I wonder they can pay it. I know the power of leveraging kicks in, but it doesn't make sense seeing current development. Alot of MNCs coming in M'sia to spike the RE prices? No, i dun think so...

And those easy entry scheme, like the most recent some project in ara damansara, selling houses basically just bangin on lrt station, providing 10% discount but the price jack up like so high, half a million to buy a condo? developer didnt even get the license to advertise yet but the sales are crazy. just pay RM3k...sounds good but scary....especially youngster just buy it without much due diligence...

It reli worries me!

Simple.. These properties definately not for average income earners... these buyers who are also not from the average income group... Having RM5k and above are beyond the average income earners in malaysia

There are plenty of bargain buys like subsale properties of properties away from urban area.. Those fully snapped up, some are taken by tycoons, 1 shot makan few biji unit...

Mostly are local consumption in recent launches... try to go around those new lauches and you will see plenty locals

High end properties which are only make up of small segment in the entire malaysia property.. Even with the recent high end property price drop in KLCC and MK, you notice average properties like PJ condos, apartment and landed property are still holding, in fact, landed property price has gone up even higher..Why??

under RM250K still a lot oni they are those "down town" area.

It is not impossible, tonnes of property under Rm250k... its just a matter of doing good research, and willing to stay further away from hot urban areas.. or stay in urban area with smaller units...


Kajang Pearl Avenue ... cheap cheap RM187 psqft ... heard its in BBB mode...

This post has been edited by eugene jk: Jul 6 2010, 11:40 AM

Those are not for average income earner, especially in major urban area as mentioned.

For average income need to go outskirt of the town already.

This crisis had been postpone. It would be due sooner or later.

PM just made the following remark.
Datuk Seri Najib Razak told Malaysians today to brace themselves for the possibility that the economy will slow down in the second half of the year in a development that could put his government’s economic growth targets at risk.

The prime minster said the slow down was due to external factors.

“Therefore it is important for us to have robust domestic demand to spur and balance the economy,”

I just wonder if it will come sooner.

This post has been edited by faceless: Jul 6 2010, 11:41 AM

Frankly speaking if go to overseas to compared, the situation of property speculation is far worst than what happening here.

When you have extreme low interest environment like currently, some properties bubble can be easily formed.
Because there are too much money chasing too few supply.

Very good point, notice recent launches are so few compare to few years back... More gradutes are flocking into urban areas by the year... More youngsters are getting into the job market... more young couple are getting married and need a house... more family are expanding and need to upgrade their home to bigger area (ie. condos to landed)

This post has been edited by eugene jk: Jul 6 2010, 11:57 AM

hurm, but i realized there are alot , i mean really alot of development at one area (take subang for example). Yes, the unit mostly sold out, but what i think senderos trying to say, could the owner pay the monthly installment?

and if they cant afford it, wouldnt it be the same like US few months ago? the mortgage issues?

btw im still noob about property, so correct me if im wrong.

IMO- if purchasers hv bought for own stay- making the monthly installments wont be much of an issue.. but personally, i think most of the units which have been bought.. newly launced and also those that are recently completed are bought for investment purposes.. namely for rental.. but there are only so many tenants to go around and those which have bought for this latter may have issues making the monthly payments when they cant get tenants to offset the monthly commitment..

just my 2 cents..

Besides, there is no legislation that protects tenant as well. Hopping around is pretty common

If those purchasers come from wealthy or rich group, then we won't have the crisis as what happened on US.

So far, at least here, banks are not extending loan to so called "sub-prime" area.
Housing loan mostly still giving out based on 1/3 of loan takers income aka you still need some proven income before bank willing to give out loan.

A lot of medium to high end properties are actually being "sapu" by richer group of people, cash rich company etc. that is where properties price appreciated the most.
Main driving force for them to buy properties
- low interest rate
- inflation expectation

So if the majority purchasers come from this group, it won't induce much problem afterwards, even though properties price going down or unable to find tenants.

Yes, properties price may be soften afterwards, but wont induce the crisis as what had happened on US as long as banks are not aggressive and too lax on giving the loan to those unable to pay the loan purchasers in the first place one.