The prospect of an increased BLR is a concern.
Unfortunately, such concern is neither a typical "decision" factor for most first-time buyers nor property investors. Over-stretching oneself into order to get your foot on the property ladder is not uncommon.
There are still good deals out there in the property market, after at least 2-3 years of price stagnant. It will boil down to whether you can hunt these bargains down within a good LOCATION.
Till then, I'll wait for a repeat of 97 (financially overstretching individuals) before launching myself onto the property ladder.

With the current marketing gimmicks proposed by new developments to BBB, the definition of "affordability to buy" has shifted in the recent years:

a. BLR is at its "lower" range, yet few consider the impact of increased BLR in the coming year(s);
b. Of the people currently BBB - how many are panic buyers? ("The rate of my salary growth isn't increasing as fast as the growth of house pricing => suddenly, it makes sense to overstretch myself?)
c. Of the people currently BBB - are property investors, not first-time buyers? Where lure by the marketing gimmicks of new development, the trend is to FLIP! Especially since the "cost" is a mere 5% of price?

I wonder sometimes, of the first time buyers, if there are no 'HELP' from the older generation, would the numbers dive downwards?

I don't HOW true and neither can I verify the cost of development in recent years.

What I can OBSERVE is ... the only bona fide argument is the cost of land. Why? If it is the cost material of development and labour cost, the rapid price increase will not only impact the KL/ KV property development but other regions will also suffer from similar increase. This argument is also true for other developing countries such as Vietnam, Cambodia, Indonesia etc. Fact is, the cost of new property development is STILL rather affordable in these places. So I can only logically rule out the cost material of development. (Plus I am sure most reputable property developer would have hedge against such cost material)

Land cost... is based on the subjective factor of LOCATION, LOCATION, LOCATION, yet M'sia is not as land scarce as Singapore and Hong Kong. If only public transportation is as friendly!

My concern has been:

a. The historical financial/ mortgage packages offered both by the property developer and banks;

b. The ratio between speculators and home-stayers;

c. The road towards economy recovery is still... LONG;

plus

IF we are all expecting some sort of correction to occur in the year of Tiger, 2010. What will happen in 2012/13 when there's a sudden influx of new fresh SUPPLY (residential and commercial)?

So let's be practical, given the "future probable" scenario:

a. People can't support the mortgage repayments...

Straight to auction houses?

b. People need LIQUID cash, but are stuck with value of the property < current loan?

c. People need LIQUID cash, but still under construction

What happens? Need info now to gear up ;D

In summary...
Price is unlikely to drop "much", but banks will faciliate and cushion the "higher" price by introducing "creative mortgage plans"? (e.g. Loans serviced by 2 generations)
Hopefully, I'll have enough bullets in anticipation of increase BLR and increase unemployment rate (the double dip in recession).

The problem with the current economy (personal view) is that NONE of the current economies are reforming. Most, like the world's number 1 market called US and Europe, are pursuing proposals to STIMULATE an already inflated market.

In the coming weeks, more noise about how none of these "recovery/ rescue" packages aren't enough. Point A - Foreclosures in the US are still a major concern. Major countries in Europe are still depressed! Did UK celebrate after a 0.1% economic growth, and announced an end to recession? Yes! Huge worry as at 0.1% can easily be a statistical error, or a way to increase the "feel good factor".

Let's see...

a. US stock just went sub 10,000 points;
b. Concerns on Commercial Mortgages, with number of bank closures in 2010 expected to be higher;
c. Unemployment in the US is HIGH, with the "true" rate higher (part timers has risen ALOT);
d. Concerns with the EU economy, specifically Portugal, Greece and Spain;
e. In the UK especially, personal bankruptcies are climbing and foreclosures are expected to increase!

In short, running out of options, and "stimulating" an already over-inflated economy is not solving the problem.

I wouldn't say the property in M'sia will go bust! I was just merely pointing out that the general economic strength isn't strong.

I personally believe the "noise" of towards economic recovery is not substantiated with raw data/ facts. My current concern is whether the upward trend in M'sia is spurred by buyers who are over-leveraging - due to LOW financing cost. If it is, there is real danger there!

From my perspective, the flurry of new launches with "crazy" prices are pricing out a lot of younger/ first time buyers.

My understanding...

During times of uncertainty, property investment is deemed to be the safety (protected from inflation etc) over unit trusts, shares etc. Same reason why Gold prices are sky rocketing!

For your information, the job reports in the US are a huge concern now, alongside with the health of UK + Spain's economy, and low interest rate strategy adopted by most countries to "combat" the "recent" recession. Overall, there has been no financial reform in the last 2 years!

Isn't Malaysian property prices pricing out many first time buyers or the younger population? If not, it is asking us to "leverage" even more to get onto the property ladder.

This isn't necessarily true.
Both HK and SG have social housing - and if you are on the lower income (not middle), you can still dream of a home!
UK, beyond London, is still very much affordable.
The edge between these 3 countries versus MYS:
a) higher income - if not, its currencies can stretch further beyond its shores, NOT RM;
b) creative mortgage plans - e.g. buy to let schemes, first home plans, 120% mortgage etc.

Drawing comparison to China is irrelevant to the Rest of the World!
Most properties are exchanged with cash, OR with a hefty down payment (the minimum I know is at least 20%). Most cities are still expanding rapidly with an influx of migrants...

Harlo!
Care to elaborate by what you mean by CANCEL your mortgage loan?
You mean walking away from your mortgage loan?

Interesting!
I realize this is quite common in the US/ or lesser, UK!
But this is the first I have heard of M'sia... Is this a growing concern?
Won't it impact your credit file, especially for future mortgage loans?

That's a very broad generalization.
The above are personal opinions of cautious investors. Ultimately, no one has a crystal ball. I for one believe the current global has no real strength.

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


Sunday August 1, 2010

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

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

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

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

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

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

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

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

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

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

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

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

---

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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

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


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

This is a healthy discussion.

I just had one recently with my realtor, and she believes that the RE market in M'sia has cooled down significantly. However, most agencies are still citing record monthly recruitment.

The basic fundamentals never change!

Define City Apartments?!

where you see one cockroach, might as well be 1000 nearby and that is what you have described here. The lending in this country is no better than the US UK or EUROPE, and the bubble no different and the euphoria which came to an end for these countries as well. US RE is still downtrending, UK back in recession and EURO defaults and ongoing mess.

All eyes on China as the largest RE bubble in Asia!

[/quote]


I don't understand why people keep on saying that China's the largest RE bubble in Asia. Most of the RE in developed countries crashed due to non-performing loans.

From my circle of friends, most of them are "risk adverse" and mortgage is a last requirement. Heck, asking for 40% mortgage is considered "shameful". Of which, I have a group of friends who acquire properties with ZERO intention to play the rental game. So tell me, how is China's RE's bubble a "problem"? China increased their interest rates for the 3rd time in 4 months, did it cool down the RE?