Hi,

I'm planning to buy a house this year, but some of my friends actually suggested that I wait as there might be recession and property price might drop. Is this true? Cause I wonder since everything's price are going up.. how is property going to drop?

BTW, this will be my first time buying a house. I don't understand the loan like Base Lendind Rate % +/- bla bla how many percent. Anyone can guide me?

Thanks .

if you dont understand any of these, its best you get a financial consultant to advise you.

blr = interest is flexible and set by Bank Negara

fixed rate = just like car loan. fixed!

FOr newbies, this is a good place to start :

http://realestate.net.my/forum

For the slightly advance one...

http://www.myrealestate.com.my


enjoy and good luck

what kind of house are u buying?


i have info that the newly developed houses price will increase by 30% next year to make up for this year's hike in steel and cement. it's a different story if you buy a second house somewhere else though ...


also, kopitiam talk is that the price of houses will increase, and then demand will drop, thereby causing the prices of houses to drop along with it... but that is only conjecture. i don't believe property in good areas will decrease in sales price.

All The Construction Materials Cost Increasing...

New House Will Be More Expensive..

Actually Now Is The Good Time To Buy..
Coz Developer Knew All The Meterials Price Increasing.. They Try To Build More Building To Gain More Margin Right Now..

Property price is likely to drop due to the following reason:
1) Over supply vs demand
2) Increase of petrol, food, and necessity item... thus squeezing people's expenditure to consider buying property
3) Increase in construction item, thus increase people's doubt whether the property company can finish the project on time or abandoned it
4) Political instability causing foreign people to consider buy property for the fear whether Malaysia is the right 2nd home to stay
5) Property price in good area will remain stagnant because there are some demand for it. But non-popular area would be hit with low demand.

I THINK new housing would most likely to be more expensive than usual due to rising cost in raw material and those older houses might drop due to economic crunch..still, depends on location tho.

ughh...Malaysian properties are so overpriced, I would better off buy a land and build my own from scratch.

There's no knowing when is right time to buy or sell. But looking at how properties have been on the rise for so long, soon enough it will stabilise or drop. Question is when.

If you are in no hurry, then save up first

It is advisable to buy now for completed projects as the price is not affected by the increase of building materials.

It is not advisable to buy on going projects as the price may be adjusted in view of rising cost. There might be abandoned/stalled projects if the developer is not making profit or even making loss.

House prices are increasing up to 30% and it is true but when there is over supply and demand is low, the price will go down. However, popular locations or locations near to public transport amenities will not be affected.

I personally think now is the best time to buy/sell houses. At least you are aware of the situation now. Nobody can predict what happens next and it also depends on how government can help to ease the burden of its people.

All the best to you

This post has been edited by agape_ian: Jul 14 2008, 11:39 AM

Malaysian property prices in general will fall, when developers and owners can no longer withstand the cost of servicing the mortgage. Futhermore, rental profits are generally falling, due to higher cost, which would further affect home owners . Out of desperation, a lot of home owners will sell. However when the prices will start falling no one knows. Some owners do have deep pockets which explains why PRIME locations value would hold better than non PRIME.

What is very attractive in the market now, is the mortgage rate. It's extremely cheap. At 4.75% you save hell of alot.

Well good luck to you buddy.

Nobody can 100% sure price will go down soon, but I have bad feeling our economy will doom. If you have enough saving to cover, it doesn't matter property price will goes down or not. At the long run (10-20 years), property price should goes up especially freehold landed.

Our stock market is still in the drain due to political reasons as well as US economy.

This is good since it means that housing prices will go up for at least until year end. Then it is projected to go down because of our high cost raw material such as steel, cement, sand and wood and weaker demand due to high property prices.

Those that can afford to buy property could do so now since the BLR rate is rumored to be increasing in August from 6.75 to 7.75%. This will seriously since you could be paying alot extra in interest to the bank.

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Added on July 14, 2008, 10:20 pmThe mortgage rate is low depends on the bank. As for me, i signed my agreement with RHB bank about 4 yrs back with 6.25 +1.9 interest which adds up to 8.15% which darn expensive compared to now. I still need to bear for another year before the 5 year bond clause expires so i can seek refinance with another bank hopefully at 4.75 interest.

This post has been edited by georgechang79: Jul 14 2008, 10:20 PM

Nobody is sure whether the price will drop or not
Will be happy if the price drop as we will get a chance to buy better properties at a cheaper price

This post has been edited by muscaa: Jul 14 2008, 10:51 PM

it might drop but over the long run...i think prices of landed property should at least remain the same and not drop...if it does not go up...

remember... location is the key word... buy a property at a good location...should be good enough to counter the price drop if it ever happens... even if it drops..it won't drop as much as those property at not so good location....

in good and established locations (eg. Bangsar, Taman Tun, Damansara Heights, Kenny Hills), don;t expect the prices to fall by much. At worse, it will just be flat...

prime location most likely to rise or at least remain..

those kampong or other than prime place will be competitive in term of everything..rental to value

Do people make land? No right? So anything time is a good time when you have holding power and it will appreaciate as long as population grow. Even a leasehold property has value because period ended does not mean you will lose the house. It's just you have to renew the title. Cause most of the houses after 99 years, im sure you want to tear it down and rebuild. Like SS2 house, after 20 years people are tearing it down and rebuild.

This post has been edited by yeehs18: Jul 15 2008, 02:08 PM

Price already increase lor...a build n sell property at cheras by ijm, previously ask on March, the price around 130k when launch, but now..said 160k when launch..so od up by around 23%

all developers have increased their prices by 20 - 30%. reason being, their cost has increased. if they don't increase their prices, they are building houses for free. but whether the average malaysian can afford these houses is a different matter.

for example, if A buys a house from the developer at the increased price, and later on has to sell it because of high interest rates, can he find a buyer at the same price?

SS2 houses are FREEHOLD. Price still very high despite the age of the house in that area.

another thing to point out.
although construction price increase 30%, the house wont increase 30% as well.
For a normal house, the true value is the location.. especially in penang.
So if u're buying 300k condo, most probably 200k goes to the location and the building material only cost 100k.
Even got increse also 100k X 30% instead of 300k X 30%

somehow i can't help but suspect that the developers are taking advantage of current situation to hike up their profit a bit as well instead of purely to cover the cost increase...

ychwang & kevyeoh, you are both absolutely right.

house prices should not increase in proportion to the building material price increase as then the price of the land is not factored in. however this seems to be the case now.

that is why i am not going to bother looking at any properties just yet. i have to wait and see how things pan out.

I think land especially in prime areas are more expensive now compared to 6 months ago, hence the 30% increase. Im not saying its right but they r in the business of making $$$$$.



For the NATOers, good luck in securing any decent properties at todays price 5 years down the road. Your cash value today will worth a lot less than it is today.

another good point by Pai. for those of you who are holding on to lots of cash, perhaps it will be better to search for a cheap 2nd hand property. that cash you are holding on to might be better used as recycled paper soon.

as for me, i am waist-deep in property investments already, so i am trying to make sure i don't drown!

perhaps after US election i will start again.

Bro,

Can't you refinance now? Read your contract. You may have to pay penalty but do your P&L and Cash Flow. You might recover after 2 years.
The banks are offering BLR - 2.2% now.
It would not be that level for long, probably until end of this year.
I got a good deal. I refinanced at 3.88% first year and subsequent year of BLR -2.45%.
BLR is expected to increase to 7 or 8 percent apparently. Lets see what the Central Bank does!

you can google some refinancing calculators, that will take everything into account such as current interest rate, penalty etc and tell you how much you can save/lose if you refinance.

Ooo.. then it's still an unsure whether property is going to drop or not in Malaysia, also depending on the location I'm trying to buy.

We are thinking of Setia Alam which is freehold but the current price is quite steep at minimum RM295K for 18X65 double storey terrace. Is Setia Alam considered as prime location?

Definately NOT.

Since the person left 1 year, i dun think he shd opt for refinancing. I myself just refinanced my hse, the whole process took me around 6mths. So in the end, if he left only 1 year be4 he is off the penalty hook, its not so feasible for him to refiance.

Means I can still afford to wait, right? and hope that it'll drop.
At the other hand, if it's increasing their price, may not increase by too much?

RM295k for 18X65?
somemore need to pay toll everyday and no so convenient to go anywhere too... why dont spend the money for ur house installment rather than pay the toll for few decades?
but i think they just increase the price, they cant sell the house for now, may able to sell those house after some times...
i got a house beside KESAS highway worth RM308k 22X70 (quality so-so, but i love the house design), built up 2100 sq ft with 24hr gated&guarded and community society type, at least almost go to anywhere no need to worry about the toll fare and may hike again in future...
even new house at Bandar Puteri, Klang (IOI property) which beside KESAS also, worth RM270k for 22X75 with better quality...

This post has been edited by gkl83: Jul 17 2008, 08:23 PM

Your view really scared me. Now I under pressure to look for house. Was thinking to let the dust settles first before looking again. Everything uncertain now.

One thing certain is that price of new house going to increase. If next week BNM increase OPR, then BLR will increase and loan rate from bank wont be that cheap anymore.

Buying house for own stay is not waiting for the right timing. As long as you like the house and have the capability to service the loan, then go and buy it.

Not scaring anyone lah, just merely stating facts

Dont buy a prop bcoz of peer presure, but buy bcoz its right for you. Right PRICE, right LOCATION, right TIMING. U'll be fine if u do just that.

Its not wrong to wait for the dust to settle, but expect to pay more when it does. Good luck

which bank on earth offer BLR-2.45% ? from the 1st year %, it looks like Maybank...

is your property in REAL PRIME AREA? finance <80%?

Waiting dust to settle?
Good, waiting people to go for desperate selling... hahaha
Nowadays many competition la, i guess. Maybe im wrong

dude...can you share which bank that offer you that nice rate?

haha... it's a good deal. it's refinancing and about 50% left.
as for bank I can't tell u la

Going back to the original question asked by the Topic Starter,

(1) If a recession hits, yes, house prices will drop. This is an unalterable, unalienable fact. What happens (although it may seem pretty obvious), is that demand will dry up (or shrink from where it presently is). Regardless of whatever prices developers charge, the no. of potential buyers in the market will drop. Gosh, unsurprisingly, this has been the case in 100 out of 100 recessions globally around the world

People will generally conserve cash.

(2) If a recession doesn't hit, i.e. economic growth hums along albeit a bit slower, then, no, house prices will not drop, but will rather rise. In this case, our economy will very likely have cost-push inflation (as opposed to demand-pull inflation), and the prices will reflect increased costs of construction. Unlike a demand-pull inflation situation though, house prices will not skyrocket. An earlier poster hit the nail on the head when he/she identified the percentage of property cost that would be likely to be hit by the inflation factor. It's not like a demand-pull situation, when overall prices will zoom up.

Thus, you will just need to figure out if you think a recession will hit or not.

If you think there'll be a slowdown, either because of global contagion, or local issues (e.g. political issues), then hold on to your cash and wait to buy at the bottom of the market.

If you think we are a resilient economy, that we will stay the course because Asia is decoupled from the rest of the world, then proceed to invest.

good commentary by playbook from an economics standpoint. should silence all those who insist that house prices will go up because of the increase in prices of building materials.

Playbook, generally we r all anticipating a drop, the big question here are :

1. Drop by how many %?

2. Even if the price drops say by about 10%, is it worth the wait?

I second Playbook's reply. Not all property prices will increase over time. Those old enough to remember the 1998 crisis will also remember a lot of bitter foreclosures when house owners couldn't keep up with increasing mortgage payments due to rising interest rates as BLR became more astronomical. Foreclosed properties were auctioned, resulting in lower house prices.

Witness the depressed house prices in Bkt Beruntung, Bukit Sentosa etc etc etc.
As always, the main three rules for house buying is location, location & location! Choice of developer is also crucial (if buying new developments)

Also, when opportunity arises, grab it quick. When the crunch comes, cash is king!
Some choice properties might soon be going lower than current market prices if a recession takes hold worldwide..

This post has been edited by fazlang: Jul 18 2008, 04:58 PM

Actually I'm working in Shah Alam. So Setia Alam to my office is actually nearer than I travel from PJ currently. I have colleagues that live in Bandar Puteri, Klang etc but the toll and time they spent are worse.

Read through some of the financial analysis.
We going to have a crisis soon. Now only midway.
Informed by a banker friend interest rate will go up by stages and it starts now.

with the recent hike in material cost, its unlikely that the property price is going to decreasing trend..maybe remain stagnant..

reasons:

(i) stiff margin doesnt allow much for developer to lower down their prices despite lower demand. Furthermore, there too many case where the developer experience cost overruns, cutting price lower would not be the best option to them..

(ii) if the price is lower, pls be extra coutious as the developer might cutting cost at the expense of quality..buying property from the reputable developer may mitigate this risk..but pricey la..

(iii) In prime area, property price is unlikely to be lower, in fact, the developer is trying to hold the their launches to enjoy hike in property prices..landed properties mahh..future value..

(iv) for small and medium size type of developer, too risky to buy from them especially during recession..they dont have back up cash to finance the construction..fully dependant on the disbursement from the buyer's financier..if they are facing cost overruns, they might just leave the construction site and winding up the company and ceased.. who will badly suffering?..BUYER>>>

p/s: this apply to new property under construction only..

ermm rate will be increase??

erm i heard that recently i also don't know when it will be happen..because i working in a bank mortgage line, it is advisable to refinance ur property if only our loan is ABOVE 5 years time because the current rate is the best rate that bank can give u by looking at 10 years record.

about the developer will increase the house price, it is true..some of the developer already increase the price and some of them canceling the project due to this current crisis,seriously can u imagine that u have paid everything, loan has been approve by banks, the loan agreement is executed, suddenly the developer canceling the project..

pity them but this is the true story that happen to my previous customer..then to me, the bank claw back my commission..isk isk

life is not fair, i guess

so keep on investing on property,the price will sustain or will be higher and at the same time u will continue to support people like me..hehe thanks

Thank you for the kind comment. Guess my 3 degrees specialising in Economics didn't go to waste after all haha.

The best answer to this question is to look with our eyes, what is the actual situation now.
Look at those prime areas for mid range properties (200-400K).
Everytime they are launched, booking will be at least 90% full.

So this is the real situation, mid range properties are still going to thrive currently, but for high end ones, be careful.

I will answer each in turn.

Firstly, you want to know what the prices will drop by? If I/we had a crystal ball on this, we'd be rich

But if you are really interested to know, you can find out broad price drops, based on *your* projected economic recession.

For example, you can run a regression on property price changes against economic growth (with additional lagged variables of 1/2 years).

However, please bear in mind: Property prices vary depending on location. As a management consultant, I did this study once on the average room rates in hotels distributed across the Klang Valley. There was less sensitivity to economic issues for 4-star and 5-star hotels closer to the Golden Triangle - this is intuitive of course, but was backed up by the econometric analysis.

If you are looking to buy into an asset, and you want to minimise a drop, you will need to just make sure you are buying into areas with resilient underlying demand. Again, it seems obvious, but sometimes people are so scared, they think that price drops are even across the board (it's not).

Please also bear in mind: Property prices will drop more where there's been a lot of property financed by loans. Again, may seem obvious, but if you happen to come across a property development, situated outside the klang valley area, heavily financed by a lot of different banks, with a middle-income consumer group, I would be willing to bet that prices in that property development will drop a lot more than in a property development in the klang valley area, catering for a high-to-upper-income consumer group, where buyers opted for less financing (paying more in cash). Seems logical, as the latter group would be under less pressure than the former group.

Secondly, this is a very interesting question! The answer lies in opportunity costs.

Ok, basically you have 3 decisions/options. Assume you think that prices will drop by 10% in 1 years time.

Option 1: You buy the property now, knowing that it will drop by 10% in 1 year's time, perhaps stable in the future before rebounding.

Option 2: You invest your money into an asset which generates wealth, earning a return of X%, before investing in the property asset in 1 year's time. Note: You can modify this option - do you need to stay in the house or rent elsewhere? In which case you deduct your rental expenses from the X% return.

Option 3: You have no productive investments you can make, thus earning a 0% return, before investing in the said property asset in 1 year's time. Note: as per above, if you need to stay in the house and would have to rent elsewhere if you don't buy it, then do deduct your rental expenses.

From above, that guides you as to your decision as to whether or not to buy the house now (even in the face of an expected 10% price drop). If you can definitely put your funds to better work elsewhere, it's better to hold off than buy an asset that will drop by 10%.

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Added on July 27, 2008, 8:58 amah, yes, fazlang's comment is important. economic analysis can tell you what the broad price drops are in a nation, but it's location of the asset that matters.


This post has been edited by Playbook: Jul 27 2008, 08:58 AM

Interest rates should go up. (Which would depress house prices)

BUT WE HAVE AN INCOMPETENT GOVERNMENT.

So our genius of a government has chosen to keep economic growth humming at the expense of higher inflation.

Thus, there was no increase in BLR recently, though there should have been.

Thus, you will see some more cost-push inflation.

Eventually, they will have to cool off inflation. Even if we have to vote in a new government.

No offence, but this statement is too broad.

As an economist, i'd be willing to hazard a guess that if the mid-range properties are being bought with property loans, they would be more exposed to an economic downturn.

The high-end properties may not be sell, but if they are backed by an asset-rich developer who doesn't need to offload them, the prices may not drop.

If you have people who are willing to borrow to buy cheap assets, you can bet these guys are going to be hit by their leveraged status when the economy turns.

Around the corner from where I live is Tan Sri Vincent Tan's home and his other neighbourhood mates, with houses in the RM10-20 million range. I strongly doubt their prices are going to drop, even though the whole development is probably only half-sold.

In other words, we're going to have a sub-prime crisis ? people who don't have money take cheap loans to buy cheap houses they nevertheless can't afford, and then when the recession hits, they'll be the first ones to be laid off. And then we'll have bad loans and depressed property prices in the low end of the spectrum.

I think we're all agreed here, if you're going to buy property, mid-high to high end (good location) is where you should invest in. Another thing is how long do you want to wait ? we have limited lifespans, if we wait too long we might not live to enjoy the fruits of our efforts.

Well, if these speculations that a great economic crisis is on the way coupled with people unable to meet their loan payments are true then some people may want to simply wait for lelong from banks.

However, as mentioned above, it will not be the high-middle to high end properties that will be lelong'd. The individuals who purchase those have holding power and are not in a rush to sell out thus the prices for those are unlikely to fluctuate too much, especially landed properties.

As for waiting to cash in on ones property and enjoying the fruits of one's labour, I believe property is an investment that should only be long term (10-25 years) although for those who are impatient - mid term investment at least (5-15 years). If the property is good, some may simply collect passive income from rental or if the price is very good, sell it for $$$, invest $$$ and spend the interest collected from FD or dividends.

*shrugs* Different people have different goals and attitudes thus how they deal with their investements will be different.

I must point out, cruel though it may seem, that those who bought properties without considering how they would manage in times of economic downturn and crisis deserve it. I truly mean those who were ignorant or had rose-tinted glasses on. Those who had personal crisis (death of a relative, illness which caused a large unexpected expense(s), etc) are excused.

It is a historical fact that every economy will face problems and if they did not prepare themselves by having extra cash flow, savings, investments then there is no one to blame but themselves. Interest rates never promised to stay in place (unless you have a fixed interest rate) and banks are not your friends. It saddens me to know so many people stretch themselves to the limit that if one thing was to fall out of place, they will sink and drown.

Honestly, if properties are an investment you cannot see yourself handling for longterm, or at least mid term, then just rent. There are plenty of fair landlords whom rent out their properties and not cause trouble so long as you care for the place properly and pay rent on time.

Very interesting thought here. I usually dont give a damn about suburbs properties as I think these properties usually r long term gains. But I do agree that your idea above sounds logic and this could represent a buying opportunity should our economy goes south.

Bottom line, the drop is highly dependent on :

1. Location of the said property - Central KL should be more resilient than suburbs like B.Jelutong,

2. Property owners demograhic - High-end VS Mid-end and own stayers VS investors/speculators

3. Most important - Demand VS Supply



Agreee with the opportunity cost approach but the flaw here is that we make decisions based on asumptions. IMHO, the safest way is to seek undervalued deals for properties with strong fundamentals.

It actually depends on which property u bought. There are some very demanded properties that are not much affected even if the recession comes.

As for how to look the demand of the properties, very simple, look how many houses within a new garden are actually fully occupied.

Over the pass 1-2yrs, I saw a lot of Empty high end properties, these owners are actually investors, when recession comes their business get hit or cannot sustain they will sell off all their invested properties, thus flood the market. Supply increase = price dropping.

I would be very interested on how these actually play on. Been holding off my family & my cash to grab any durian.

Well, if they are well prepared for recession then they will still most likely hold onto the properties if they are able. If they had enough income or savings stashed to weather 1-2 years of economic instability then may not be too many durian runtuhs.

It is all very uncertain now how bad those holding high end properties may be hit. We can only be certain those who aren't prepared will be badly hit as they stretched themselves too far with no nest egg to see them through bad times.

Wait and see is probably what alot of people are going to do for now.

However, if you can buy an undervalued property in a good location then it may not be advisable to wait... I think money is better protected in property than in the bank right now as inflation hits.

Your dollars and cents be worth less and less compared with properties that is more likely to protect ones $$$ value. Unless of course FD goes all the way up to 10% then naturally FD will be very tempting XD

But of course billytong is right, basic economics cant be ignored - if more supply than demand, price decreases. If supply is less than demand then naturally price increase. Note that that is why many investors try to snap up properties close if not within the city as land and development there will eventually exhaust itself and more people come to live and work there. I doubt that it will be in the next 5 years though... Thats why property must be seen as a long term investment to truly reap the rewards.

Long term in the sense of what ROI.

If it takes a property raise its value 50% in 10yrs, then it is not a good property.

I usually like to look for those that I can get 15-30% ROI within 3yrs.

hi, i have a question regard re-financing house loan, here my condition:

Current Principal Balance : 90K
Current Mortgage % rate : 4% (company loan)

With current bank interest rate at ~4.25 percent should i consider refinancing, as i try the refinancing calculator at http://www.ykconsultancy.com/refinance.htm, it say good to do it..?

Pls help to advice.

Thx

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

yeah investors will be shy away from msia market/properties
Time to pick up some cheap shares or properties

even you picked it up, it is still not certain the long outlook going to be..

By the way, what is your M&A refer to ?

so, what you are trying to say is, our economy (malaysia), will be directly tarnished by the slowdown of USA, IF THE USA ECONOMY SITUATION DOES NOT IMPROVE ?

i believe, this is pretty common concept among us, which we all know. and, i also do understand that we are FAR FROM RECESSION, AND THE IMPACT OF USA to our economy is, pretty slim.

What is the main products which we export to USA? yes, indeed FURNITURE is one of the list besides semicon. we, in malaysia, the products we export are mainly raw material. besides, mould plastic, chemicals and minerals, are also, our main export to western country, which include USA.

Why do i say, our economy does not have much impact from USA SLOWDOWN? Let me give an example, i am also supplying BONDING MACHINE, which is for the use of flattening of micro chips in SEMICON industry. one of this machine cost roughly 200k USD. my main and only regional market is MALAYSIA and Thailand, but, which SINGAPORE OERLIKON, which is also my Partnership, that based in Switzerland, monopoly the whole Far East Semicon.

We, in Malaysia and especially Thailand, the demand for this Bonding Machine (which is just a size of ATM MACHINE FROM ANY BANK), is high, and consistently. Dont forget, the spare parts of this machine will generate millions of USD annually.

Now, where does all the Bonding Machine and its spare parts come from ? 70% from USA, and the rest from Europe.

So, to me, i am not an economist. I am a mechanical engineer. thus, to put economy in order, i believe, we have to include practical and some theory together, not just by giving and refer to all the data.

Will our property affected by USA slowdown ? it is that simple, if you buy at decent location, you are the winner. I do not quote this baseless, because, i am a property owner, and i personally been through this.

hi, i'm a kns technician

kns, esec or asm wirebonder? yup those spare parts cost in unbelievable price. 15cm x 6cm x 2 cm block of clamp cost rm2500...unbelievable, especially those kns'ses(weak in design for maintanaince, but effience in developing fast output).

actually, i hope the price of property will go down like 20% less. If not, salary for those average people like me will start thinking about migrating to another state such as nilai or seremban or perak...~~~on-semiconductor company or cashem semicon hohoho.

I would be more concern of the over growth issue. Something like the US face in the past 2 yrs.

The recent years luxury properties have growth at a very rapid rate. It would be interesting to see how this sector plays when foreign investor bail out.

This post has been edited by billytong: Aug 1 2008, 04:12 PM

hmmm maybe i should hold my self from buying a new house thinking of buying my very first ..

I think you r wrong here. Look for the definition of a recession, then u know why I said we were far from it.

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Added on August 1, 2008, 7:24 pm

If there's no recesion, then there's no need for such bail out nor oil money(apart from taxes), rite? Ur assumption that we will get into a recession was based on nothing concrete.

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Added on August 1, 2008, 7:27 pmHi Playbook, mind sharing with us the recent take up rate for KLCC area?

This post has been edited by Pai: Aug 1 2008, 07:27 PM

Pai,

<<If there's no recesion, then there's no need for such bail out nor oil money(apart from taxes), rite? Ur assumption that we will get into a recession was based on nothing concrete.>>

USA is either in slow or no growth or recession now. Do you think Malaysia will be unaffected by that??

And, the situation in USA is getting progressively worse.

Dreamer

You are too optimistic dude, so do you think that the KLCI will go up to 2500-3000? Or the properties eg 2 storey terrace in KL will shoot up to RM1mil?

RM1mil? possible, but maybe when?

last time a double storey cost RM20k or less...quite long time ago, and some of it cost RM400 to RM500k now...what makes u think it won't go up to RM1mil?

correct, are u from CARSEM SEMICON IPOH ? IF U IN THE PRODUCTION LINE, I MIGHT KNOW YOU? Yes, Seremban semicon booming drastically.
Pai, since when we are facing recession ? we do will affected by usa slowdown, but, at the moment, it is very slim. malaysia economy is still in infant stage, Pai. Our property market also in early stage. we are stil growing and learning. dont compare with USA MACRO ECONOMY AND WITH HUNDRED YEARS of development history.

One thing, i agree is, USA indeed is getting worse, but, they will not take too long to recover.

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Added on August 1, 2008, 11:18 pmMuscaa, come on, i really do not know how to response to the quotes. by the way, do you really know what is recession and what is the major challenge our malaysia economy facing? but, dont worry, everyone have different thinking and perception.

This post has been edited by a6meister: Aug 1 2008, 11:18 PM