September 2, 2010

Is there or isn't there a property bubble in Malaysia?

I suspect that the banks have seen it coming since last year due to a few experience by my legal firm's clients when their developments are being rated as unworthy to be supported by the few banks within the vicinity of their housing development. The banks gave reason such as unattractive pricing and unfavorable locations, whilst using the sub-prime in America as an examples. 

All these excuses are given while the same banks financed housing developers in Kuala Lumpur selling strata development as small as 600 square feet at the price of RM1 Million or more. My clients were selling a semi-D with space at a price of RM220,000-00. Very much affordable to the average Malaysians with average pay between RM2,500 to RM4,000 (at the most). 

There are a few newspaper articles (which I think is quite a good effort by the Star, a local newspaper) which try to address this issue. It starts off with an article on the price war by banks around town to beat the foreign banks who have more depth in offering cheaper loan rates. Here is the links to that article entitled 'There maybe a price war to give out cheaper Bank loans'. According to that article, the price maybe at Base Lending Rate (BLR) minus 2.3%. And if you are smart enough in shopping around and twisting some bank officer's arm, they may even negotiate you a rate lower than that.

Then, Bank Negara Malaysia announced an initiative a few days ago about their effort in preventing speculative buying by asking banks to only give margin financing up to 80%. Here is the article on that entitled 'Banks to try and prevent speculation on property prices' in which in the same article, the housing developers are jumping to stop this from happening as it will be hard for them to market their products.

In my opinion, in all these articles, there were scant mentioned of the man on the street point of view in which I have seen for as far back as 2006 (before the 2008 economy slowdown). It seems that all forgot to think about how unaffordable it is houses for some people. Those who can afford to buy a 20' x 70' houses (a normal terrace house size) can sometimes have to be burdened with unreasonable financing rates (and margin) while those who can buy cash at anytime, can negotiate their margin and financing rates. 

Someone (I think it was a blogger) wrote an article once about how this is going to lead to imbalance in economy and the creation of ghetto. We already have a few of those ghettos and I am just hoping that the government is realizing the danger of speculative buying and the creation of the property bubble which I believe is very much in progress.

I am going to be joining Azizi Ali the renown millionaire coach, who will be talking about this bubble (properly) in his talk entitled 'Property Investment For the New Decade'. In that seminar, he will reveal while he thinks the property prices in Malaysia at the moment is unsustainable and what is the best investment you should invest in at this moment. As this blog post is more on my views on the property bubble than the talk, let me promote the talk properly in another post.

No comments:

Custom Search