Thanks Pai, strong response and worthy for those here to view.

As for the US comments, I only use these as an example of speculation, emotion and yes how the US woes have an ultimate effect on global investors. The US coughs, other countries seem to get a cold. I could have used the UK or EUROZONE as same example.

For the record, I have never said properties on KL could drop to the levels of 60%, I have maintained a correction of 10-30% based on those areas and types of props, landed or not which have had run up due to speculation only. You will see significant drops in China, HK and SING. Malaysia will be okay.

My point on investing is an important one, at no time should your total investment in any one asset class be too high. In this case I use a 40% of my assets in RE as a max. RE is easy to invest in, and in a downturn not easy to sell unless you drop your price quickly and grab some wanna be vultures before the sellers dry up and play the I'll wait for another 10% down game.

As for these other investements listed, these are the liquid ones I tend to use and with a good mixture can net an avg. of 12-15% return but still stay ready for any volatility which is what the next decade is all about....globally. I like you around 2007 used the Buffet model but saw the bubble forming and had to learn quickly what other asset classes were needed for balance and in some cases to some heavily weighted in RE, survival!

I have been a avid RE investor for years and have done extremely well however may I subscribe that this is the first time in history where I see a very unique trend occuring which mates credit expansion with demographics. The boomers, gen x and gen y's are all in trouble and being in one asset class such as RE is already shown to be troublesome.

The problem is simple IMHO, our people are partying and drinking from the punch bowl similar to those in the rest of Asia and world and to the point in which the RE market is defined as UNAFFORDABLE. This is where the trouble starts and eventually ends.

The solutions as I have posted before:

1. Dont buy what you cant afford thus keeping the 40% rule in RE investments.
2. If you can meet this criteria then it's all about location and future trends in KL and KV. I see a highest correction in KL with affluent areas as trends (cheap borrowing/relaxed banks) driving up these the most in the last few years along with the new speculative group who have bought into new developments in these areas.
3. If you have bought previous to 2002, no problem! If you have purchased 2003-2004, with the run up of 50% then fine but if you purchased 2006 to now, take a look at recognizing these nice gains and sideline yourself with liquid assets ready to re-invest.
4. RE is an emotional game right now. The wrong trigger can turn it to negative!
5. If the Articles in the MSM are talking about a bubble or potential for it, the position is already there and it's just a lagging response to try and curb it via measures on speculation.
6. Industry professionals when asked to comment on the perceived formation of a bubble are all neutral to positive means they hope they can ride this one out. You dont have an industry professional, who's livelihood depends on the health of RE this question and expect them to be bearish even when the writing is on the wall.

There are two types of people on this blog, invested and not invested. You can guess which one I am right now. I am not counting on the fundamentals this time as there is a massive disconnect between what is truely happening and what is perceived. I have been there before, have won and lost but know the new game to be a divided one between the afluent and not, just like the middle class disappearing in the western world, the same will occur everywhere.

As for location, I am looking to purchase next only for personal use! This is in these affluent areas that are most bubbled, hence my position! As for investing, looking for land, land that can be worked with minimal infrastructure for local and export purposes. 30-60K per acre on outskirts of KV.

That is all I can share for now!

More on Malaysian property boom

We have an interesting topic last 2 weeks that OSK bets on a Malaysian property boom. We too share the similar view, due to below several reasons:

1. Low interest rate.
US FED will continue to maintain a low interest rate for prolonged time. If Bank Negara continue to raise OPR, Ringgit currency will be come stronger and bad for our export. We forecast Bank Negara won’t increase OPR again in 2010.

2. Easy Credit.
Banks continue to lend money generously because they have too much liquidity.

3. Foreign funds come to emerging markets (that are developing Asian countries, Malaysia included) to seek better return.

4. Domestic consumption story in Asian countries.

Several negative news reports we see here or there are only noises. Some control measures are expected but it won’t stop the property boom.

http://propertypartners.com.my/988/more-on...erty-boom.html/


OSK bets on Malaysian property boom
By Zaidi Isham Ismail
bt@nstp.com.my
2010/09/04

Malaysia's property sector is set to see its biggest residential boom in a decade, led mainly by medium- to high-end landed properties, says a research firm.
The sector may peak sometime in 2012/13 before going into a potential slump, OSK Research Sdn Bhd said.

OSK Research said a major mass housing boom will likely occur in the first half of this decade.

It added that the sector was already entering the early stage of a property "super cycle".

"Although the expected peak in 2012/13 may have dire consequences, the phenomenal boom that immediately precedes it gives investors an excellent opportunity to profit from the trend for at least the next 12 months.

"We, therefore, seize the opportunity to upgrade our property sector call to overweight from neutral," OSK Research said in its research note to investors yesterday.

Although location is key to identifying real estate opportunities, what is equally important but often overlooked is timing, it added.

It noted that the current 20-year boom in the medium- to high-end residential properties since the early 1990s might peak in 2012/13, after which mass affordable housing could dominate the real estate industry around 2015/16.

Stocks with focus in the medium- to high-end segment, such as Sunrise, YNH Property, IGB Corp and Bandar Raya Developments, are some of the best bets for the next 12 months.

"Mass housing developers, especially the 'fallen angels' such as LBS Bina and MK Land, may come to the fore as another major investment theme after that," OSK Research noted.

For "best of all worlds" exposure during this period, OSK Research recommends buying SP Setia.

It said the country's current boom in higher-end residential properties is probably in its longest "bull run" ever, spanning almost two decades since the early 1990s.

"This, unfortunately, has also given rise to the illusion of the infallibility of properties. We are now entering the final phase of this secular boom, which will be characterised by a period of fast-rising property prices in the medium- to high-end residential segment, particularly landed ones."

OSK Research observed that those born in the 1950s had become more risk-averse in their investments since 2003/04.

"As they approach retirement, they will divert a significant portion of their wealth into savings and traditionally perceived defensive asset classes such as real estate.

"However, their eventual absence may bring an end to the boom if there is no credible demand force to fill the void."

Emkay Group senior general manager Mazrita Mazlan said the wealthy do not mind paying a little bit extra as long as the properties are away from congested towns.

"As an example, MK Land (MK Land Holdings Bhd) will launch its Rafflesia high-end project, which has units starting at RM2 million apiece.

"Already the project has sold 100 units even before its launch," Mazrita claimed.

Mercury Securities head of research Edmund Tham said the boom will only benefit certain areas and selected developers.

"When it comes to the so-called boom, it depends on who you talk to. I believe there is a property overhang project in Mont'Kiara and some buyers are facing financing problems."

Independent property valuation surveyor Sharizal Supian said the trend right now is to go for boutique projects complete with gated communities and modern facilities and townships, such as UEM Land's Symphony Hill which saw units snapped up within days of its launch.

"The boom, however, only benefits the rich and does not benefit the general public," Sharizal said.

An Island & Peninsular Bhd executive said that only foreigners will benefit from Malaysia's property boom due to the cheaper ringgit.

http://www.btimes.com.my/Current_News/BTIM...icle/print_html

To get full OSK report on their bet, please click below link (1.56MB).
http://propertypartners.com.my/sharing/Pro...20%20Report.pdf

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Added on September 19, 2010, 1:25 pm

We believe Malaysian property market is currently at the general recovery stage.

This post has been edited by allyche: Sep 19 2010, 01:30 PM

Chief, I reckon you dont buy REs for passive income?

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Added on September 20, 2010, 1:19 amwhat a BS...........


This post has been edited by Pai: Sep 20 2010, 01:19 AM

In the past yes, moving forward no! I believe the age of the house is over but will invest in a home during the correction.

People still have to rent though so there would be opps I might look at but with rental returns very low now and I believe in future, I will put my liquidity to work searching for higher yields and what I believe will be some rare opportunities in the sectors I follow.

many people say things because the person who pay them want them to say certain things
or at minimum, they cannot say something that goes against their sponsor

you are right
now those heavyly invested reacted furious when saw comment on bubble bursting...
those missed the opportunity hoping it will burst soon...

100% not will drop la..
^^

Forum is a place to discuss and share opinions. Our opinions won't changes the course of market. You won't need to agree with my opinion but please respect the freedom of giving opinions in this forum. Be mature.

This isn't addressed to anyone in particular. Just my thoughts.

1. Analysts for equities and properties are really useful. As a rule of thumb, I tend to do the OPPOSITE of what they recommend

2. The same can be said for respected economists like paul krugman. It's easy to analyse in hindsight, but what practical experience does he have? I tend to read these analyst reports with huge skepticism.

3. Anyway, I can pretty much infer that the guys from OSK who wrote the article above may not be investors. It may be easy to analyse trends. But again - where's the practical experience?

4. Banks have ample liquidity and want to lend? Again, I'm shaking my head, because I may have an insider view on that. Banks are under EXTREME pressure to shore up more liquidity! Why do u think there are tons of aggressive deposit campaigns suddenly popping up? Some banks are giving 5% FD for fun? Have we ever asked ourselves why? (The rationale behind this is worth another separate post) Now, these jokers from OSK want to say that banks have ample liquidity. Sheesh.

5. Our beloved Central Bank is finally waking up, with its "hints" of tightening in the Mortgage and Unsecured market. Again, my fear is that they have moved far too slowly. Perhaps "vested parties" have been exerting too much pressure on them via our mainstream media

This post has been edited by Phoeni_142: Sep 20 2010, 11:10 PM

everyone.... just BBB... it wont drop....
take up all the units...
the take up rates have been very good this month

Now I know why your views on our RE market is often so gloomy and why you placed utmost importance in timing your entry. Anyhow Im a yielder n I believe in buying golden goose that caters for the mass. These props IMHO are recession proof props

could you elaborate more on this?

Good. I like this. Well said.

Yes, these points are all valid. Keynesian or Austrian view in ecomonics, the GREAT GLOBAL RESET is underway. Believe half of what you see and none of what you hear.

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Added on September 21, 2010, 9:11 amBanks are simply overweight in loans. RE, credit cards, automobile, lines of credit. They are running the numbers and noticing they have and could face a much more serious liquidity problem when the correction occurs. It comes down to affordability in RE and operating costs. You leverage your LOC's and CC's to pay other expenses to offset your disposable income going into the roof over your head.

If you can get 5% rates on deposits that is a sure sign they see it.

Unlike the US banks who offer no return on deposits which is killing the retired folks on top of large RE losses. The banks cannot offer high returns on deposits when the rates are close to zero. The government does not want the consumer to stop spending, just curb spending.

There will come a time when this cycle plays out and those with liquidy will be chased around all day for their deposits and healthy financial record...it is just not right now in the Western World but maybe in Malaysia. With our BLR in a good position, this is all possible and believe a good move by the banks.

Quite simply you need to read between the lines on these subtle moves. The Banks are in control, watch what they do first and understand the underlying message it contains.

This post has been edited by Onemorething: Sep 21 2010, 09:11 AM

Source: http://thestar.com.my/news/story.asp?file=...73123&sec=focus


A property boom myth

IT IS enlightening but worrying

to read the report “Is a property bubble forming ?” (The Star, Sept 18).

Those with the credentials seem to concur that the bubble is still in the early to mid-phase of an up-cycle. It’s the same song sung by analysts in developed countries just before the real estate bubble burst in 2008. A similar phrase telling the people it’s better to buy now or you can never afford to own a house as prices will be spiraling high.

The point of contention is about speculation and high leverage

exposure of property investment and its inherent risks affecting the common people and the overall market.

In general, for the middle and lower working classes, owning a house and a car could literally take up 1/3 to 2/3 of their monthly income. In chasing the high

property prices on fear of even higher prices in future, it’s the ordinary folks who will suffer the most when the bubble bursts due to excessive speculation and

leveraging.

The systemic risks of high

leveraging on fixed assets like

property can be highly destructive.

Logically, any counter measure should be viewed from a distant perspective to ensure that the

benefit derived from it is

sustainable.

However, that does not seem to be the case, as measures taken and policies implemented by a majority of regulators worldwide are very much geared to provide instant results to satisfy the immediate expectation. It may seem beneficial to the majority but in reality, it’s just pushing forward or delaying the imminent problems.

While we know that derivatives are speculative because typically it’s highly leveraged, some as high as 20 to 40 times of their capital. In the same dimension, let’s examine the magnitude of leveraging on the property market in Malaysia.

With the availability of 5%-95% loan package, a house valued at RM500,000 requires only RM25,000 as deposit to make the purchase until its completion. From the owner occupiers’ perspective, it’s a positive move as it provides them an opportunity to own a house.

However, from the investor’s point of view, the ratio of leverage is 20 times the house value. The gains and losses are equally magnified by the same magnitude.

As greed equates the high

potential gain, speculation seeps in, pushing the house value to RM650,000 (30% gain) within a year. When the next buyer purchases the same house at RM650,000 he/she has to pay a deposit of RM32,500 and service the loan of RM617,500 instead of RM475,000 when the house was valued at RM500,000.

For the bank to justify the

borrower’s financial ability to repay the loan, the borrower either has to increase/decrease the monthly repayment or shorten/lengthen the tenure in relation to the

borrower’s age. This is where the cycle of destruction begins.

Speculation and high leverage exposure is not a bubble, it’s a

visible inflated balloon passing from one hand to another, easily burst with any external force, the last to hold the balloon bites the dust.

In this respect any investment with leverage ratio of more than four times of initial capital, the potential risk of bursting increases proportionately.

Therefore, to ensure a house for every family, speculation and high leveraging should be curtailed. Possibly a loan package of 10%-90% for first-time home owners, followed by 25%-75%; 30%-70%; 35%-65%; 40%-60%; 50%-50% on each subsequent purchase. The same may apply for other factors like stamp duty.

SEEONEMAN,

Penang.

Housing loans currently comprise some 26% of total bank lending. Commitments on future disbursements not included. Add to that Personal loans and other loans that may be housing related and you see a better picture of overindulgent consumer lending. If you include real estate and construction loans, lending to the property sector is well over 40% by banks, a historical high. Much of that lending could be speculative. If that is not over-exposure to one sector, I don't know what is. If the credit tap gets turned off for any reason, and there can be many, the ensuing credit drought will scorch all property prices. No party lasts forever.

http://www.youtube.com/watch?v=6G3Qefbt0n4

Some of the stuff Peter Schiff said made absolute sense.

Schiff has many points in line with the extreme bear. He's a Goldbug, sees hyperinflation, USD demise, sell all RE and rent etc.

What we are about to find out is how our global governments fair as united or in separate camps dealing with bubbles popped and current bubbles in place and or forming. I see a GREAT GLOBAL RESET coming (well it's here already) for the next decade where Asia corrects but emerges finally as the next super power.

Key word is government and how banks control them in good time and in bad. I could spew off a long winded detailed explanation but at the high level, look at it as the correction is coming, USD debasement will eventually occur, this will force all other currencies to debase to level the GDP playing field.

The strength or the MYR is excellent if you are an importer but killing you if you're an exporter. The best thing Malaysia can do is provide a balance of domestic and export business. Unlike China who will rely on exports for many years until their people can afford to purchase these goods.

I see many of these governemental swings to be self serving and will cause disruption in the marketplace. Deflation is upon us and has been controlled through monetary expansion for decades now in the USA. We have done the same to some extent here. China has done it big time!

Asset Deflation is Malaysia is very close and to the insider specifically to RE, is listing their properties while unsuspecting buyers are still on the radar. Some are very smart and dropping prices quickly to get offers in. Some will unfortunately be behind the curve and run the risk of being stuck in the Vortex of a downward cycle, unable to sell at any price while buyers deminish due to stricter lending controls and/or knowing that waiting an extra 30 days can save them another X%.

We are all in different RE camps on this forum. Some cashed out waiting for the correction, some in properties hoping this is just noise, some running out and buying now as they feel it might be their only chance, some have carefully purchased smart locations over the years and looking long term and that flight to safety is RE.

I dont have a crystal ball but only a position based on experience and understanding the agenda of those who govern us along with the banks dont do anything without good reason and that the bill goes to the taxpayer anyhow. In Malaysia I agree with the likes of Fernandes and Nazir who call for less government regulation and better freedoms for capitalism. Let's hope they are heard and Malaysia can leverage all that is great here moving forward.

This post has been edited by Onemorething: Sep 22 2010, 11:39 AM

Free-Cow-for-House Scheme

A developer based in Rajkot city, Gujarat State, India, outsmarted his rivals by offering a free cow for every newly-built bungalow. Not only did buyers sucked up to his offer in droves, the deal also freed the roads of cows which were a constant source of traffic disruption in the jammed roads in India.

As an additional sweetener, buyers get to park their cows in shelters specially built for them, called "Cow Parking Space" with cowherds to take care of them. At a monthly maintenance charge of only 5,000 Indian rupees, the house owners also get their names dangled on the cows as well.

A by-product of being a cow owner is that buyers get to enjoy free milk and other dairy products. Not surprisingly, sales topped 80%, trumping most of their rivals who could only offer the usual gold jewellery and cars as incentives.

There must be a lot of people still out there thinking about this question, definitely more then when the thread was started in 2008.
In general of course some property prices have already dropped, some will drop and some won't. It depends on too many factors.

Anyway, I'd like to offer some advice for people buying for own stay. When you are buying for own stay, please take a long time comparing new and older properties in your target location. An older property in the same neighborhood might be a lot cheaper.
You are going to pay for it and live there for a long period of time. Make sure you actually love what you are buying. Don't just buy because there is some cheap financing option. It might be better to save up some money and buy a cheaper place somewhere else a bit later. My advise, if you have time, would be to rent around your target location first if you don't know it so well.

If you are an investor you must know more then me so I can't give you any advice but can wish you good luck.