Quite simply the Malaysian property market in general has not been affected as much as say Singapore or Hong Kong given the size of those bubbles prior too the crisis last year. The continuation of cheap money and money printing by the US FED RES continues to put a false bottom on their ecomony therefore more declines and a double dip (well I see it as the first bottom due to stimulus) recession are coming in spring 2010.

Current Case Shiller 20 City Index still is over 30% down from peak and they see another 15-20% to go before it's done. If interest rates rise, property values will come down further. Baby Boomers are looking at their weak portfolios and ready to cash out therefore flooding the market with upper middle class and upper class RE on top of an 18 month current supply and another 8-10 months likely of shadow inventory (houses empty close to 2M units in USA which have not been put up for sale) via government intervention and to keep their balance sheets clean.

It's a big PONZI scheme anyhow in which the USA is doing their best to bankrupt the rest of the world.

SING and HK markets have false rebounded based on this along with Canada, Austalia and New Zealand. The EUROZONE and UK are in as bad shape as the USA but less the manipulators. Once the US takes is next dip, look for the whole thing to happen again but this time with less speculative buys especially in RE and with rates potentially climbing less with qualify at the banks anyhow.

If KLCC property is down 30% then is was likely overpriced anyhow. If there has been no rebound in the last 8 months in these properties, look for another 15%+ to shake out.

When I arrived here from HK in June 2009, I looked at a home in D'sara Heights. Ask was $6.5M and sold for $4.8M. That home now asking $5.7M but when all shakes out, will likely end up selling for around $4.0M if rates stay low, $3.5M as rates begin to climb.

I would simply look at the avg. home prices back in 2003 and expect to return back to those levels. In the USA, we are looking at returning to post dot.com prices in many areas already.

And furthermore, if RE values decrease, so will rent and with this leg down to muddle for about a decade in the USA expect at least downward pressure in KL for half that period as Asia and other BRIC countries emerge with growth potential.

When to buy, I would look at 2-3 years IMO!

The first rule in RE is not to buy at the top of the bubble!!!!

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Added on December 17, 2009, 5:54 pmThe second is when interest rates are at the bottom RE is typically at the top!!!

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Added on December 17, 2009, 5:55 pmWhen interest rates begin to move up, RE will move down!

This post has been edited by Onemorething: Dec 17 2009, 05:55 PM

None of us will be able to time the the deflation of the bubble so you must take profits now. When it pops, everyone will be trying to sell and it will be too late. Those on the sidelines with liquidity will reap the benefits as always.

Take the HK market now, the government stepped in again to limit loans to 40% down instead of 30% down from the bubble heights pre crisis where you could actually put 5% down. This was to hold off the bubble growing in HK but has failed as RE investors have moved to the secondary market and picked up more RE.

The herd mentality is alive and well in RE and this is the only sign you need.

1/RE prices are only high due to cheap money
2/A small increase in rates will be enough to stop the growth in RE and begin the downward cycle
3/Sellers will start dropping prices to take profits starting the spriral affect
4/Banks will start tightening lending practices
5/Rates will rise a quarter to half percent each quarter and RE prices will dive

I believe that single family homes in prime locations in KL are over priced by upto 30% on asking. I expect that in the next 12-18 months this 30% will not only come off but another 15%+ given the above changes.

We are actually lucky in KL as the bubble is only a small one unlike SING and HK, or VANCOUVER/TORONTO which can correct by 50%+ down the road. Also expect a very long flat recovery 5-7 years and the power exchanges hands from the west finally to the east.

On the flipside, KL is a unique place to be right now, given the US is still trying to bankrupt the rest of the world. Japan stuck in QE for another decade along with UK and EUROZONE. CHINA is the wildcard right now as they have their own issues! Canada is in the biggest RE bubble on record ready to pop before or after the Winter Olympics and AUS/NZ should be also taking a double dip when the US does.

I refer to this whole period of time as the GREAT GLOBAL RESET!

If I were you, I would be sitting on the sidelines ready to pick up great opportunities of a lifetime!

2010 is going to be a very difficult environment! If you own any asset, you need to find a buyer so you cannot afford to be overweight in anything!

RE owners are typically overweight on RE! If 40% or more of your net worth is in RE, then be very careful!

The double dip will occur and this will finally be a REAL, not a false bottom, occurance.

If Malaysia's dependance on exports continues, if the mortgage market continues to provide buyers with cheap money, then this is only the beginning or re-inflation of a local bubble - it will not end well!

The correction in RE that I have projected is in the highest end markets and while I do agree with a small demographic of buyers being older more affluent (may have owned these properties for a long time), are still business people and may be advised to cash out chasing higher alternative returns. Note, these owners have multiple properties and will need to sell 30% of their RE assets to service the remaining.

The others who are not in this camp will need to sell, especially when interest rates rise and they are unable to service their loans and/or valuations deminish downpayments.

I agree with the poster who mentioned us building a mini-bubble in RE in Kuala Lumpur. While there has not been the same loose lending here, there has been enough!

On the Global front,

Watch for another 18-24 months of DEFLATION! Watch for the S&P the next 6-8 weeks for all the downward indicators. Watch for a GREAT UNWIND with very little place to hide in 2010 except the USD Index.

The GLOBAL ECONOMIC PIE IS SHRINKING so watch this period of deflation breed potential runaway inflation. Then watch RE hit lows!

Theme for 2010 - The beginning of second great depression! USD Index 0.825 - 0.88. Dont look to the Bond Market! Dont look to T-Bills or GOLD.

Europe will lead, so dont own any EURO!

People are not prepared for any of this! My negative scenario is lower lows, my optimistic is a very sad sideways Japan style economy which could last a decade.

Either way RE in Asia will be negative due to many real and demographical forces, especially in the luxury segment! It will start in China, deleveraging will be name of the game.

Trades for 2010, stay on the sidelines, buy USD, watch for a dip in GOLD under 1000, sell off property, domestically I can only think of gov bonds and any strong bank and utility "divendend paying" stocks!

This post has been edited by Onemorething: Dec 27 2009, 12:58 PM

Dont mistake pessimism with being a contrarian!

As for listening to RE Agents, Banks, Brokers, Financial Advisors, Economists and most importantly the US FED Chairman, who do you think created the bubbles.

There are only a very few I follow.

Malaysia like most will lag behind the these predictions so yes the bubble will continue here and herd mentality in tact. I would expect you have some more time before you need to sell.

How much time is the key, buying needs to be put off!

Timing is everything, isnt it! The long term strategy still applies to RE but not right now. To try and time any market comes from pure speculation and greed and one will never be successful at doing it.

I simply saw the original bubble coming around 2005 and took my RE profits and since the crisis have not seen any good opportunities in it.

I only buy when there are a few buyers, when rates are on the rise and a strong future rental pool for luxury properties.

I see the first two in Malaysia coming true in 18-24 months! The last one may take a decade to occur.

Without the 3 in place, i guess it will have to be my primary residence in which I rent to myself.

I believe 2010 will be a revealing year providing us with indicators of what is in store for the next decade in which one major shift will be a loss in love for RE. Residential & Commercial.

Like I mentioned, anyone with over 40% of their net worth in this one investement is at high risk.

If you want to look to where things are going, you dont have to look to far past the boomer generation which is, begining this year, starting to retire.

It will be Boomers who will most likely kick off the downturn to continue further down in the US-UK-EURO and spark big bubble CAN AUS and a stop to the re-inflated bubbles in the ROW including ASEAN & ASIA.

Boomers are now looking closely of what they have left to retire on and 7/10 dont have enough money outside their RE to last 2 years into it.

Boomers will be faced with a simple conclusion to downsize and once the first phase occurs RE will tank. Compounded by interest rate increases, job losses, pay cuts and higher taxes....it wont stop!

What else will happen is boomer parents which are not nearly as well off as people think they are, have to be taken care of by their boomer children and this means selling the grandparents home at the worst time followed by the Gen Y Xers who are looking to keep their 0/40 homes from being foreclosed by the banks.

This is the new trend facing RE and it doesnt take much to understand it.

Foreclosures and inventory will be massive, shadow inventories so high that banks cannot hide them anymore. This crash crashes everything in it's wake and no bottom can really be found for likely a decade as property has to come back to an affordable level and to a time where your home was not an investment but where you lived.

For those of us dependant on the consumer for our products and exports, get ready as the decade of thrift is upon us and Consumer GDP heavy countries who dont produce anything are in big trouble.

China goods will be to expensive for domestic consumption so count them in the bubble turn bust for Asia.

Those with rental income properties, you know what happens to rental income with home values drop, take profits on re-inflated homes propped up by a false ecomony and get ready for REAL OPPORTUNITIES which will come, some pretty unobvious but with nice yields.

Here's a very good recent article for you to view.

Read US home sales plummet, personal bankruptcies soar
By Tom Eley
6 January 2010

http://www.wsws.org/articles/2010/jan2010/hous-j06.shtml

Foreclosures continue to increase. In 2008, more than 1.7 million mortgages fell to foreclosure or similar actions. In 2009, the number swelled to 2 million, and in 2010, the figure is expected to increase to 2.4 million, according to Moody’s Economy.com.

The looming glut of new foreclosed homes will drive down home values by as much 10 percent next year, bringing to 40 percent the four-year drop-off, the New York Times reports. This will swell the ranks of “under water” homeowners—those who owe more on their mortgage than their home’s market worth. Moody’s estimates that one third of all US homeowners, 16 million in all, find themselves in this predicament. The abandonment of homes in negative equity is now a leading cause of foreclosures.

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Added on January 8, 2010, 5:00 pmI don't know how much clear it gets than this:

By Scott Lanman and Craig Torres
Jan. 7 (Bloomberg) -- U.S. regulators including the Federal
Reserve warned banks to guard against possible losses from an
end to low interest rates and reduce exposure or raise capital
if needed.

“In the current environment of historically low short-term
interest rates, it is important for institutions to have robust
processes for measuring and, where necessary, mitigating their
exposure to potential increases in interest rates,” the Federal
Financial Institutions Examination Council, which includes the
Fed, Federal Deposit Insurance Corp. and other agencies, said in
a statement today.

Let me point out a few things.

1. We have never seen a crash and rebound in US stock market history like what we have just experienced, except once. That "once" was 1929/1930. What followed next was a grueling grind - not a crash, but a grind that never ended, and in which the market lost more than 80% of it's value. Those who argue "the bigger the dive the bigger the bounce" forget that the only true comparison against what we have just seen was in fact the prelude to a grinding 90%+ overall decline.

2. If you believe in "long wave" cycles - that is, Kondratieff cycles, we have precisely followed the several-hundred-year long pattern though its latest incarnation, with the 1982-2000ish period being "Autumn." Winter follows fall. These cycles seem to happen mostly because all (or essentially all) of the people who lived through the last cycle's horrors are dead. Unless we have found a way to break a cycle that has endured far longer than our nation, we're right where we should be - which incidentally aligns with what happened in 1929/30 as well. This means that while there may be ups and downs we have not bottomed - not by a long shot - no matter what people tell you.

3. Interest rates can only go up from zero. That should be obvious. Rising rates are not positive for equities and multiple expansion.

4. The Financials are getting a tremendous bid the last few days, presumably on the premise that "employment is at least somewhat stabilizing." With zero short rates and a steep yield curve, this means they make a lot of money. But rates cannot stay where they are if in fact the economy is recovering, and if the long end rises it will choke off housing.

5. At the same time people are rotating into a sector The Fed and regulators just said will be forced to constrain its profits people are fleeing the stocks (tech) that have been on a tear. This is exactly backward based on the news flow. Are The Fed and Regulators lying or is the "optimism" incredibly misplaced (and even stupid if they're rotating out of winners for what were just announced would be losers!)

6. P/Es are at record levels. Yes, that's on "as reported" 12 month trailing, and it is down materially since one of the two "disaster quarters" is now gone. But even with the other gone (which it will be in another month) we will be trading at somewhere around 40 or 50x earnings, an utterly unsupportable level and above where we were in 1999 - just before the entire market fell apart. Even on "operating earnings" we're trading at 24 times - outrageously overvalued from a historical perspective.


This post has been edited by Onemorething: Jan 8 2010, 05:00 PM

This is a great read.

By Andy Xie 01.10.2010 18:32
Trapped Inside A Property Bubble
When China's real estate bubble finally bursts while exports become less competitive, the consequences could be severe.


http://english.caing.com/2010-01-10/100106991.html

A 50% drop in RE values in KL...likely not in our lifetimes however a correction in the next 18-24 yes in some overinflated areas based on investments using cheap money. How much one can only wait and see when rates go up and a double dip hitting MY exports again. This correction will be the same as the previous one but get used to not selling a damn thing to the US consumer over the next decade. Global imbalances, protectionism, decupling & currency crisis. And let's not get started new taxes coming our way.

Locally still looking for those preferred shares in Oil Gas, Banks and Utilities paying divendends....has anyone got a suggestion to what is out there!

Also, look to Silver (the poor man's gold) to make a strong play when the currency crisis takes hold. Now trading 60x GOLD, will trade at 15X GOLD historically in all other currency crisises documented.

Before the decade is over, East vs West, I just hope China doesnt implode! Maybe two currencies, backed by what though? and will there be a reserve currency in the end.

Many have taken advantage of stimulus in Malaysia via low interest rates. This on paper makes RE affordable to groups unable to buy previous.

When the market turns, and it will finally, it will not end well for RE anywhere!

Rates must rise, lending practises will become more strict, unemployment will rise in 2010-2015 and as a result listings will rise quickly.

“There is no means of avoiding the final collapse of a boom brought about by credit expansion. The alternative is only whether the crisis should come sooner as a result of a voluntary abandonment of further credit expansion, or later as a final and total catastrophe of the currency system involved.” Ludwig von Mises

I am not trying to compare KL or Malaysia RE to the ROW as it is by far kept a very small bubble compared to other Asian destinations most notably in SING or HK.

I see only a correction of about 10-15% but enough for many to default on personal property with low down payments and rises in interest rates. I do see however the potential for further drops as the ROW is in trouble for the next decade and this has the usual knock on effect to MY.

What could happen though is the compounding of forces which WILL occurs in high bubble areas whereas you search for a bottom for years as unemployment, partial employment and salary cuts keep the gap for affordable housing ongoing for years until prices are low enough to bring new buyers to the table.

Issue is always, will buyers hold off looking for the bottom or just the fact there is far less buyers who qualify during these times.

Property investors will always leverage themselves differently and sell properties to cover current ones. I have associates in SING and HK who are now selling to grab the top and mitigate risk and they are the biggest property bulls I've met.

You will never time the top or bottom but those who move early always win.

Good Luck!

I think the key thing here is that you cannot be looking at RE anywhere without considering the global financial climate and KL is not by any means exempt from it.

This decade will be filled with uncertainty that will be very uncomfortable for most who have little to no investment experience but took on low interest loans and long ammortizations as it became affordable to buy more house with less for some, allowed people to once and for all purchase instead of rent.

All of this cheap money inflated property prices and yes the house always win.

Speculators purchasing in the last 3-5 years were thinking no correction so leveraged.

Even an investor with property purchased 10-20-30 years ago should be cashing in right now as the market for RE in all parts of the world inflated falsely to an unprecidented level.

Government intervention will only make matters worse and delay the inevitable. Why do you think the banks are getting bailed out and who do you think is benefitting before the REAL COLLAPSE takes place.

CASH IS KING! Liquidity is key!

The best time to purchase RE is when interest rates are at an all time high as prices will be at their absolute lows.

Tightening of loan policy will exclude many buyers thus taking prices down further which include shorter ammortizations and higher downpayments.

For those of us with large cash positions, we will not only be in the best buying opportunity moving forward, but will be the only ones who qualify for purchases. And when that is only a finite few, you can bet the loan incentives will include great discounts and free Hondas and Toyotas offered both by banks and the seller!

2010 will mark the transition of the GREAT GLOBAL RESET!

This post has been edited by Onemorething: Feb 2 2010, 01:34 PM

Higher Interest Rates, Devaluing Currency, Cripled Markets, Troubled Exports, Tougher Lending, False Inflation to hold off Deflation and Greater Unemployment. All elements which will turn the RE market sour.

Malaysia fortunately will not suffer the downturn to the same extent in which the ROW will including SING-HKG-CHINA.

However, you might as well take your time as once the correction does occur the market will be sideways for years.

There are still many ways to paper over the worlds financial problems however these efforts always end badly.

I see after a flood of comments for many weeks that now there is none!

This contributor is stating the obvious and big picture view which is rare on this forum!

Good for you!

More shoes to drop shortly!

EURO will go to $1.25 then to $1.28 by year end. POUND to Follow then all hell breaks loose on the USD.

What does that mean for export driven Malaysia???

There is nothing that supports US RE is going anywhere but down.

55M Mortgages in US today
8M Mortgages 90 days behind (98% will foreclose)
12M Mortgages Underwater (85%+ will foreclose)

Values now to 2003 levels
Transactions same as 2000 level

RE investors are begining to buy only locational opps = good rental returns but bottom is about 10%-15% more down if you are looking to buy.

Major asset purchases have fallen off a cliff (ie. RE purchases)

Commercial RE over a TRILLION have been put on 3-5 terms that just wont be able to renew.

It doesnt matter how low RE goes, it’s the cost of servicing the debt that will make the difference. You cannot do so in high income and property tax destinations.

You cannot do so if you loose your job or take a pay cut moving forward. Your jobs are going offshore forever!

There is NO BOTTOM IN RE until unemployment hits 4-5%. There is NO BOTTOM IN RE until interest rates reach 5-7%.

Look to the US for further bad news and limited imports to hurt Malaysia along with the other western destinations. Look to a revisit or double dip OR longer muddle through where the pain is prolonged for 8-10 years.

Look for some correction in Malaysia also from pending RE bubble in CHINA.

This is not major but minor by global standards including depressed RE values with every point of interest rate rises.

Be grateful you live in Malaysia though where the cost of living is one of the lowest in the world, unemployment reasonable, lifestyle very good and a growing consumer along with all SE Asian destinations.

the MM2H program has or likely never will attract enough foreigners to make a difference IMHO. The program has actually been dropping off within the last year. It's a great program but badly marketed by the government.

---

Added on April 19, 2010, 3:57 pmHere’s whats coming in addition to the SEC chasing down any major bank involved in the RE crisis, Commercial RE in the USA with loans coming due from 2010-2014 will equal $1.4T in which 1/2 are under water already.

You dont think during all of this we are not going to test new lows in the stock market and that Res RE has more to go after Deals on Foreclosures are Flushed out. There’s another upto 20% downside nationally in RE.

While the ecomonists are showing 25% in effective negative equity (1 in 4 in foreclosure) the REAL number is likely 35% if you account for what you owe the bank + realtor fees + new 10% down on your next residence! That’s 1 in 3 and likely will test 1 in 2 by 2015!

8.4M homes are in default. Banks take best case provisions on loans but when the shadow inventory comes due and this downward spiral continues the next 2-3 years you can count on 16-20M defaults.

There are 23M Home Equity Loans under water!

How anyone expects 10-12 years of massive credit expansion to be delevered in the next 5-7 years is insane!

Markets will get hammered and there will a correction in RE for Sing, China, HK and YES Malaysia. You will finally see air come out of the bubbles in Canada and Australia as well.

Higher rates, stricter lending practises and the above leaves the door open to buy in Malaysia for sure. Correction could be 10-15% but remember that for most RE is an emotional purchase so if its a buyers market then look for better deals in the next 2-3 years.

Malaysia as a whole I DO BELIEVE has a strong future in the GREAT GLOBAL RESET when Asian Money drawn to the west comes back to Asia but who really wants to live in China or India!

SE Asia has the edge!



This post has been edited by Onemorething: Apr 19 2010, 03:57 PM

Let's factor China into this equation. China has one of the top property bubbles right now that can change things on a global scale. Forget the rise in Sing, HK or the bubble that never deflated are are #1 and #2, AUS and CANADA.

Why do you think the Chinese are so careful about the Yuan revaluation.

Put is this way, when construction is 60%+ of GDP, in which is now in China since exports have fallen off the map, there are only two other countries which did this, one is Japan in the 80's and the USA in 1929.

Condos and Commercial RE in China purchased by speculators is massive and if China turns off the presses domestically they are in trouble.

China will have to likely devalue their currency as to start a trade war and/or focus on using foreign treasuries to cover.

This is when I see commodities take a tank on lack of demand given so many raw materials are getting swallowed up by China.

Timeline, who knows how long China will demand 9% growth and do everything possible to get there not thinking of the compounding issue.

Some estimate loosing stream end of 2010 and trouble brewing spring 2011.

This matched with the massive Commercial RE bubble popping from 2010-2014 in the US and another 15% down in Res RE it's going to get messy for us in Southeast Asia.

We will have trouble in Malaysia, to what degree is unknown!

Same was true for the HK market!

If you want to know where RE is headed in the US, follow this link....read it carefully, watch for a repeat of late 2008.

Buying property anywhere in world when rates are on the rise is just foolish. You simply wait out the rate rise just before the top when those in overleveraged positions default or bail driving property pricing down for the whole period, guessing 3-5 years then you have the potential to move back in.

http://pragcap.com/updating-our-outlook-on-housing

I'm sorry but under the GREAT GLOBAL RESET, I just dont see enough SE Asian buyers, or any buyers globally being better positioned to purchase as less will qualify, unemployment will rise and household income to cover your needs only, if you are the avg. Malaysian I dont see it.

This post has been edited by Onemorething: May 4 2010, 02:30 PM

Yes the herd is cautious right now, western world investors in bubbled destinations are taking profits now. Remember, when affordability due to stricter lending practices and higher interest rates come our way, there is only one way for RE to go. Supply and Demand. It doesnt matter if there are no condo developments on offer, it's the resale market that will be flooded with sellers as they purchased 2-5-7 years ago for 30% less looking to either take profits or service debt if overleveraged.

Leverage has been the magic word for the last 20 years, it will be removed from the RE vocabulary. Big money down and your rating on service debt will be all that matters. I will take it one further and expect lenders to look at those assets you do have as either volatile and/or liquid.

Cash, Stocks, Precious Metals are liquid....RE, Term Bonds, Vehicles are not!

Malaysia is funny place...I agree with one of the posters above on the mentality towards RE. It has to do with being part of Asia but also the access to other investments which are not available. That is either good or bad moving forward but if we double dip which is what I'm expecting, it's not going to make a difference, RE will move down and for an extended period.

If the Malaysian banks offered fixed term rates for 10-15-20 years then I support the long term view, but with rates to rise and running variable, you have to wait or you'll be under water at some point for a renewal.

As for inflation hedge, RE is not at the top of the list as an inflation hedge as RE only depreciates during inflationary times however if we do get into a currency crisis the only hedge I know is Gold and Silver and commodities which again need to be purchased early while fiat currencies devalue against them.

I have a prediction, the US is out to bankrupt the rest of the world, flight to USD is upon us once again. At some point all currencies will be devalued to write off sovereign debt nation by nation. Once the EURO - USD cross is 1:1, that is when you will see the USD start to falter.

The challenge will be where to store your USD when this time approaches, Gold, Silver?

The local challenge will be how will Asia fair, and I'd say better than the western world. I will predict the DOW to fall to 8000 by 2012 and to 5500 by 2016-2018 just like in 1813, 1842, 1857, 1920, 1932, 1942, 1948, 1982. But then again the 200 year cycle of the US is complete in the next 5-7 years so Asia is poised to lead the way.

Good Luck to you all!

This post has been edited by Onemorething: May 10 2010, 05:32 PM

I find it strange that a very few on this blog look for direction based on global markets and are only KL centric. What is your point?