There is some bubble, no doubt, but the chance of so called total collapse is remote, some softening, yes, high probably.
Bubble burst in big way and price collapse, highly unlikely.

China different story.

As for Penang, land is always a scarce factor, so does in KL prime location.
When you buy a landed properties, you are buying the land value, not the houses actually.

There is a lot of demand from foreign investors as well, not only local demand, especially some area that a lot of MNC company around.

The bubble is more concentrate on mid to high end properties. So even the high end properties bubble burst, it doesn't translate we can buy cheaper properties that range from 100-300K one as well.
Those mid to low range properties won't go down too much, it is the high end suffer the most.

Saturday, July 10, 2010 (from MISH)

Global Housing Bubble - Based on Ratio of Price to Rent, Which Countries are the Bubbliest?

Inquiring minds are wondering where the biggest housing bubble is.

In what should be no surprise, the Economist rates Australia #1, followed by Hong Kong, Spain, Sweden, France, and Great Britain. Supposedly, US home prices are undervalued and Japan (having gone through decades of deflation), the most undervalued.


http://globaleconomicanalysis.blogspot.com...n-ratio-of.html

I though it was going to drop after the sub prime woes but I was wrong. More and more property are comming up and people as still buying in spite of the high price.

This post has been edited by faceless: Jul 20 2010, 02:59 PM

NFW - http://www.internetslang.com/NFW.asp

NFW NFW...property will never drop. There was one time when they said the materials price went down. Cements especially. But price still the same.

Just like chicken rice. Will only go up buy never go down.

Wednesday, July 21, 2010

Ponzi "Shark Loans" Fuel China's Housing Bubble; Home Sales Plunge 44% in Xiamen; Bubble Busts in Tianjin

China's property bubble is now on the verge of collapse. Transaction volumes are significantly down and declining volume is how property bubbles always burst. In simple terms, the pool of greater fools eventually runs out.

In China's case, the pool of fools is heavily involved in "loan shark" schemes where speculators hope property values rise fast enough to cover the interest.

Ponzi Loan Shark Operations Fuel Bubble

Please consider The Secret Engine Behind China’s Housing Bubble- The Ponzi Shark Loan Finance

In this article we will show how the ponzi shark loan scheme works and why we think the regime in China will fall. Our research is based on sources INSIDE CHINA

This is how this Ponzi scheme works:

Local officials, [required by] the government to produce double digit GDP growth numbers, give real estate developers permits to build housing projects in return for bribes. They also get bribes in return for allowing the shark loan companies to operate under their jurisdiction. Some of them are active partners in shark loan businesses. Every scheme has a ring leader whose job is to collect money from all the participants in the Ponzi scheme. When some of these Ponzi schemes blow up, the party leaders always get bailed out first.

Most of the funds that are collected in this classic Ponzi finance go to local land purchases and real estate development. Part of the funds are used in order to pay back the rolling loan. The short term interest rate in this black market is very high and ranges between 20%-150% annual rate. The sources of the Ponzi funds are diverse, as ordinary citizens, banks with corrupted bank officials, and state enterprises play the game.

A reader wrote to us this email two weeks ago, which triggered our in depth research:

“My hometown is Zhejiang, now I live in shanghai, my sister pledged her home to bank, she lived in Hangzhou, she bought her home around 500,0000rmb five years ago, now her home worth 2 million RMB, so she can get huge loan from bank, she gave this loan to a shark loan company with 30% return every year, she has been doing and living on this for 4 years, she is a middle school teacher, she earned 4000rmb per month, but with this lending arrangement, she has been able to buy a car, the interest income is 6 times of her salary, One of my cousin's father lost all his principle of 4 million since one scheme blow up in 2008. That is my personal experience. ...

see more of this enlightening article at http://globaleconomicanalysis.blogspot.com...as-housing.html

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Added on July 22, 2010, 8:26 amThis Blogger actually is quite good at understanding bubble theory. Again, it can simply be calculated based on Price of RE : Income or Price of RE : Rental Prices.

For example, affordability is 3.5x income and it appears for properties 300K - 7M the same applies that 8-8.5x is where they stand.

For rental, you seem to require only 50% of the repayment for ownership fully financed, with BLR-2.3% on a 30 year ammortization.

Both support bubble reality.

While extreme bubble markets like Australia & Canada are showing signs of readiness to pop it is unlikely they will have any affect to Asia, however with CHINA showing a massive housing bubble to be contained, followed by HK and SING, you can expect that negativity to reach us in Malaysia.

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Added on July 22, 2010, 8:33 amDEFLATION!

Price of assets drop while cost of chicken rice goes up!

Developed nations get hit hard!
Developing nations get hit bad!

This post has been edited by Onemorething: Jul 22 2010, 08:33 AM

Hi all, need some of your advice. I am thinking to buy my first property investment. At the moment, I am thinking to buy a condo but my parents insist that landed property got more value in future.

The reason I wanted to buy a condo is because it is hard to find a landed property below 350k and in good location and furthermore I felt that condo is easier to rent out'

So what do u guys think?

Has anyone seen how the bubble POP in Dubai?

Those mansions in man made island Palm Jumeirah change hand easily 3-4x and price inflated god knows how many times even before building completed and handed over. Plus the government 5yr projection of population growth by 2x to inflate the property bubble causing it to burst finally. We saw it coming just wonder when.

We can see similar scenario in China. When my china relative was here 4 yrs ago, he already said Shanghai property inflated double in a short span of 2 yrs! Wonder how many times has the market inflated by now?

Anyway, back to Malaysia, have we seen similar scenario here? I don't think so. May be in certain place inflated >2x like Desa Park. Other than that where else?

Yes, when China & US badly hit, everyone will feel it. Unless massive retrenchment follows by unemployment, don't expect property to nose dive. Yes, there will have some hick up, some bumps, don't foresee bubble if any.

Bubble in KLCC burst 2 yrs ago, even that understand worst sold 30% below market rate.

Question:- would the bubble burst twice esp in KLCC?

That will be good opportunity for many. But seem there are many like you waiting for the bubble to burst meaning you are in fact capable to sustain further drop.

So you are in fact answering your own question.

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Added on July 23, 2010, 11:16 amEither condo or landed both have their own advantages and disadvantages, all depend on how it suits your strategy and plan.

Nowadays for renting you have to be particular with the location. Condo easier to rent with higher return cp landed. 30-40 yrs down the road good location potential en-bloc sale, like in Spore.

Landed long term only the land valuable not the building cause building design probably outdated. Come to think abt it, why dont we buy empty land then if no plan to stay. That will be much better than many other unit trust, shares, bonds, investment plans or retirement funds can offer. Of course buy the right location if you can.

Understand Desa Park developer bought the land in early 90' for $10/sqft. Now??!!

This post has been edited by Bobby C: Jul 23 2010, 11:24 AM

The main criteria is always affordability.

No point buying so called a property (disregard landed or not landed) which future potential of appreciation is great, but stress one's monthly financial into max, which leave no room for error.
Immediate situation with no cash, you "die" first disregard how your properties value can appreciate 10x in the future.

Quote from someone, "the future always surprises us, ALWAYS!"

Fellow forumers have been anticipating the property price to drop due to bubble. For me, that indicates the there are people (investors) are still not 'greedy' enough. Let this scenario go on for longer time, perhaps 1 - 2 years, perhaps 3 - 5 years (I guess no one knows). Bubble still has not burst, investors would start to lose patience. Slowly one after another investor would start buying. When investors have came out to BBB, the market will be real hot + hot + hot. Well, I guess that when the real bubble is forming. As long as there are still someone yapping about Property Bubble, the bubble would not burst.

Old news but think still relevant. This is what the experts got to say.

Property price increases to moderate as higher BLR kicks in
The Edge, Written by Lim Siew May
Tuesday, 01 June 2010

KUALA LUMPUR: In mid-May, Bank Negara Malaysia (BNM) revised its key Overnight Policy Rate (OPR) by another 25 basis points, following a rate hike by the same quantum earlier this year.
Shortly after that, most banks revised their Base Lending Rate (BLR) accordingly to 6.05%. After a total interest rate hike of 50 basis points since the start of 2010, has this had any impact on the country’s property market and mortgage lending activities?
Mortgage Broker Sdn Bhd sales director Adrian Un sees no immediate impact on mortgage lending activities. This is because the effective interest rate is still hovering around 4% to 4.2%, making the borrowing cost still relatively cheap, he said. “Purchasers are still flocking to developers’ sales officers, and are dealing with various real estate agents,” he said.
According to Liew Swee Lin, executive vice-president, head of consumer banking of Alliance Bank Bhd, the recent BLR increase of 0.25% is considered marginal. “This translates to a 2% to 3% increase in monthly loan commitments which we deem to be within the tolerance of the homeowner. Consequently, we would neither expect any significant impact on mortgage lending activities nor have we observed any since the revision,” she said.
Property consultant James Tan of Raine & Horne International Zaki + Partners shares a similar view. “The increase in the BLR and OPR has had no effect at all on the property market. In fact, there has been an increase in prices,” he noted. Tan foresees that rising interest rate will only have an impact on property market when banks increase the spread to more than 2% to 3%, or when the BLR hits more than 7% to 8%.
However, are the rapidly rising prices sustaintable?
Group chief economist of RAM Holdings Dr Yeah Kim Leng said the spillover of escalating prices in high-end, niche segments to the broader housing market, especially the terraced and mid-range condominiums in urban areas, is a concern.
“We note that it is hard to agree on what constitutes a bubble, but clearly, double-digit price increases are unsustainable, especially if the price escalation is fuelled by excessive price mark-ups, speculative purchases, over-leveraging and easy credit conditions,” he said.
Meanwhile, Liew said the latest House Price Index (HPI) statistics released by Napic (Department of Valuation & Property Services) indicated an increase of only 1.5% for 2009, and 4.7% in 2008, which suggests that the sector was not heading towards a bubble.
But property consultant Tan said it was essential to get back to the fundamentals. “Incomes have not kept up with property prices at all. Prices have shot up across the board of more than 20% to 30% over the past one year. Yields are dropping drastically. The net return on shophouses tended to fetch around 6% to 7%, but it is less than 5% now,” he noted.
That said, Yeah reckoned that the local housing market has not reached the “bubble-like” state seen in other Asian countries such as China, Singapore and Hong Kong. Yeah predicted the recent acceleration in property prices and mortgage lending to moderate as the effects of higher OPR and BLR kick in.
“Higher lending rates have the effect of dampening speculative buying as well as overall demand as borrowing costs edge up,” he said, while predicting that genuine home buyers will be less pressured to rush their purchase decisions with the gradual dampening of rising house price expectations.
According to him, potential oversupply in a number of property segments, including in hot areas such as Klang Valley, together with the gradual pace of credit tightening and declining affordability, should help to dampen price run-ups.
These should help prevent a full-blown bubble from developing and subsequently collapsing, as experienced recently in the US and European property markets, concluded Yeah.
Nonetheless, Yeah doesn’t expect home sales to fall off sharply as lending rates have not peaked. “There will be buyers, especially owner-occupied ones, who are looking to lock in the low interest rates before they are raised.”



Layman point of view, think there are still some ping pong ball size bubbles developing esp newly launch developments. Few 'Mini Mont Kiara' forming in some not so prime area but asking for Mont Kiara price. Yup, potential some small bubbles popping, not full blow bubble.

Why? Say an established >5yr old developments where most owners have easily paid >30-40% of the loan amount, you think they will be so desperate to sell? Yes, when they get retrenched. Even that just refinance and drag loan till retirement or cucu-cicit.

Whereas new development main speculators rushing in with less than 10% down payment. Not prime area but asking for prime price, yes, bubble will burst when developer asking for full payment during completion and you cannot get the expected rental return. But completion time of each development is different so you will hear mini popping sound over couple of months, not a sudden BIG POP which will affect entire market sentiment ... that considering worst case scenario when economy downturn in the coming future as many expected.

Well established area? Nope, wouldn't be as bad as you are hoping for.

Insightful gem here n well said

Taking the first step to buy a property can be a very daunting task for many of us..there are so many "what ifs"..that can totally discourage one
from buying any!

One important point to remember is that if you are buying properties off plan (or from developer) ensure that it is a reputable one. With rising costs and all, many of the less financially strong developer might just go bust..if you are buying for your own stay, ideally it should be close to your work place and with not too many tolls along the way..with rising costs, every cent counts in the end ..

jess
www.ipropertymalaysia.com

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Added on July 27, 2010, 10:33 pmIn most cases, the capital appreciatiion in landed property is higher than condos. Yes in general condos are easier to rent out and the rental yield is much better than landed property. Anyway, nowadays many young purchasers are opting to stay in condos due to security consideration. just make sure you buy in a location that is easy to rent out ..it should be near to your work place..the nearer the better!


Jess
www.ipropertymalaysia.com

This post has been edited by jessy123: Jul 27 2010, 10:33 PM

y worry about drop while you buying for own stay...up and down you still living a quality life.

because a lot of people buying for investment?

Bcoz you will end up buying at higher price which the actual value is not. You may get 2 unit instead of 1 unit if the property value drop by let say 50%?

Flexible Housing Withdrawal from EPF - another factor to keep property bubble from bursting?

If and only if you can trade properties like you trade stocks, then you can expect such volatility of 50% drop.

And if that ever happen, you can guarantee to see worse blood path in the history of KLCI, red hot chill pepper that you never seen in the Malaysia Book of Record!

This post has been edited by Bobby C: Jul 30 2010, 07:01 PM

Isn't such news alarming enough? Where's the BBB mode coming from? The ease of access to cheap loans?


Sunday August 1, 2010

Over 9,000 Malaysians declared bankrupt since January
By IWAN SHU-ASWAD SHUAIB
newsdesk@thestar.com.my

PETALING JAYA: Over 9,000 Malaysians have been declared bankrupt in the first six months of the year, accumulating bad debts up to RM12.4bil.

Insolvency Department director-general Datuk Abdul Karim Abdul Jalil said the “new bankrupts” included individuals who defaulted on credit card payments or vehicle, housing, personal and business loans.

The debts incurred by 9,129 borrowers between January and June this year exceeded the RM9.28 bil owed by 16,228 individuals during 2009, he said.

“About 40% of the bankrupts had borrowed from one or more financial institutions,” he told Mingguan Mstar, The Star’s Bahasa Malaysia weekly.

Department statistics showed that between Jan 2005 and June this year, 81,908 persons had been declared bankrupt, with accumulated borrowings of RM71.36bil.

During the same period, only RM281.99mil or 0.3% of the total borrowings had been repaid, said Abdul Karim.

The bankrupts, he added, were categorised into the borrower, and social and corporate guarantors.

“Not all debtors have jobs or assets that enabled them to settle their loans,” he noted.

“Without any financial sources, how are they to repay the loans? This has made distribution of dividends to creditors difficult as well as delayed the process of them being discharged from bankruptcy,’’ he said.

Of the total number of bankrupts, 4.66% were social guarantors while 5.32% were corporate guarantors.

He said 11,223 of the 81,908 people declared bankrupts in the past five years had obtained court orders discharging them from bankruptcy while 9,523 discharge cases were approved by the director-general.

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Added on August 1, 2010, 11:13 amAnd another one!
We have the highest household debt in ASIA!

Saturday July 31, 2010
Mixed views on possible retail credit bubble
By YVONNE TAN
yvonne@thestar.com.my

PETALING JAYA: Amid the current healthy loan growth trend, there is concern that a retail credit bubble may just be in the making, according to some analysts.

“As current economic traction is positive and interest rates relatively low, (therefore making it accommodative for consumers to take up loans) – a key question to ask the local banking sector now is whether it is high time to re-balance loan portfolios away from retail loans, which dominate half of the industry’s lending,” RAM Ratings head of financial institution ratings Promod Dass said.

If the industry keeps up this trend a retail credit bubble will be inevitable, Promod told StarBizWeek via email.

UOB Kay Hian head of research Vincent Khoo concurs. He said: “In fact, I think there is already quite a bit of a bubble on the housing side.”

The growth in retail or household loans made up largely of housing and auto loans have been relatively encouraging in recent months amid signs that the economy is on a growth track.

Based on Bank Negara’s latest data released yesterday, outstanding loans to households grew by 12.9% on an annual basis as at end-June, outstripping outstanding loans to businesses which expanded by 7.2%.

From January to June, household loan applications totalled RM159.9bil with approvals at RM88.4bil while business loan applications were lower at RM131.6bil with approvals at RM72.3bil.

For the same period, small and medium enterprises (SMEs), a sub-sector of the business segment, registered loan applications of RM62.2bil with approvals at RM28.7bil.

“For the nation to achieve its desired gross domestic product growth over the next few years as well as the vision of a high income nation, more of the banking sector’s lending would need to be channelled to non-retail sectors with high multiplier effects,” Promod said.

Danny Wong, fund manager and chief executive officer at Areca Capital, downplays the credit bubble concern although he does admit that based on data, the trend is set towards that direction.

“The concern is there but it is not alarming,” he said.

Wong pointed out that heavy consumer spending provided a boost to the economy for as long as consumers could make their payments.

As at last year, household debt in Malaysia stood at 77% of gross domestic product – the highest in Asia. This compares with 64% in 2008.

Nevertheless, Wong said the situation was still “manageable.”

“I believe that Bank Negara will be very swift in raising interest rates to curb any possible retail bubble,” he said.


This post has been edited by terzam: Aug 1 2010, 11:13 AM

I am considering buying property for own stay / investment. Some said if dont buy now, will never afford in future. Some said the price is too high now. Should wait and see...
After reading this thread for some time, I still dont know what to do...
Just wonder how people can have so much $$$ to own so much, while some graduates studied hard and worked humbly for more than 10 years counting every cent before purchasing...
I guess $$$ goes to the risk taker...

WAIT! property price increase too fast in too short a time.
bubble will burst..