Why a housing bubble will always happen again and again. All over the world

If you read the news around the world, there are people keep saying a housing bubble is imminent in their county. Although it has just happened, like in the United States when the last housing bubbles brought down a few investment banks which had been hit by the sub-prime scandals, people who are smart enough say a housing bubble is in the making there. China is another country people is expecting to have its property bubble burst anytime soon. Why does this keep happening again and again?

It is due to the nature of housing. People keep on buying houses to live in it and to try to make a lot of money out of it by selling it at a higher margin. The question is, why don't people learn that they will drag down the economy due to their greed to make a profit? Why do they keep on doing the same thing again and again? Aren't the governments around the world doing anything about it?

Here's the thing about housing. There are genuine buyers who want to have a roof above their head and there are those who think houses as an investment. They are mixed together without any borders separating them in the same space. When you see a long line queuing up at a property launch, you cannot determine who are the genuine buyer and who are the speculators. The speculators who buy and want to make money out of the property want the same treatment the genuine house buyers are getting. It will make the profit higher as the housing developers will throw in so many things into the sale. Including cheaper housing loans.

Governments around the world have been trying to control speculative buying of property by imposing tax on the profit anyone makes when a property is sold. In Malaysia it is known as Real Property Gain Tax. The current tax regime impose tax on property sold within 5 years of the property being bought. The tax imposed is a withholding tax where the seller will have to pay the Internal Revenue Department and only get it back once it is checked out there was no profit made on the property transaction. The withholding tax for Malaysian property sellers is 2%.

Does this current withholding tax stop or reduce the property transactions or sales of houses? Does it stop the speculative buying of houses? No. It does not.

Here's why.

Any good property speculator will know you only have to factor in the cost of the Real Property Gain Tax into the margin that you will make from the sale of the property. This Real Property Gain Tax is not the only thing the property speculator has to contend with. The Malaysian government has imposed in 2010 a maximum margin of 70% on any third housing loan taken by any one buyer. That is already a deterrent factor there. Still people buys houses speculatively and try to make huge profits out of it.

Banks are also culprits in the making of housing bubbles. Why? Because they make so much money out of giving out housing loans to people who want to buy houses, whether they need it or not. A speculators adage has always been "If you can use other people money, do not use your own money." This has also been the adage that fueled a few of economic crisis in the world.

Another factor why housing bubble will visit the world every few years in this modern era is due to the property gurus that keep teaching people to buy and sell property to make a profit out of it. While these property gurus go running and laughing to the bank thanking the gullible students for paying them an arm and a leg trying to learn how to make money from property speculation, new property speculators are born and play the property speculation game all over again

So, as the sun keeps on shining and people keeps on needing a house, a housing bubble will keeps on visiting each property hot spot.

Again and again...

*Originally wrote this as a LinkedIn post : https://www.linkedin.com/today/post/article/20140617041553-25491383-why-a-housing-bubble-will-always-happens-again-and-again-all-over-the-world?trk=prof-post

Tag is the new handshake?

I have been tagged by the Ratty of the blog The Everyday Adventurer who can be considered as one of my first blog buddy (who I had fleetingly thought was a woman, for some reason or another, but is not) who updates his blog like I do mine, which is every day. His is more organise and is more on the beauty around his area.

Tag is a game which seems to be making it's round on the blogsphere where you are tagged then you choose whether you want to play the game or not. I am a virgin in this game. This is my first time so I hope to get it right. The tag thing maybe simple but tagging another 6 bloggers maybe a bit harder as the blogs I follow does not really do this kind of stuff. I mean, some don't even know I am following them and some are not for the faint at heart...

6 random thing about me :

1) I have quite a temper although I will never admit it to anyone and I alawys like to smile. My parents, siblings and my wife knows it and hate me for it.

2) I sometimes do impulse shopping when I am at a sale although I hate shopping as much as the next guy especially buying clothes where I have to try out the item

3) I drive fast when I am alone. Sometimes my wife is in the car. I am a road bully at heart but sometimes I let all those small car past by although mine can go much faster. Much, much faster...

4) I never really smoke a cigarette, ever (as in inhaling it like a real smoker) but I do smoke cigars, on occasions and I never drink any alcoholic drink ever, intentionally although I suspected I did drank unintentionally a few of it when I was in university during those Saturday nights.

5) I was dating eight women at once, once, and if not for that I may never have met my wife.

6) I am so in love with women since I know them that I am surrounded by them at work, at home and when I was a bachelor, some of my best friends were women...

So, that's the 6 random thing about me which some may seems unbelieveable but true.

So, I tagged -

1) Curryegg - a new blog friend found on Bloggers United a blog aggregator site handles by a Malaysian;

2) Mem Aluyah - a very old friend who I met again through Facebook;

3) Relax - a straight A student (he claims) who has a very good website dealing with money whom I got to know through plurks and Bloggers United;

4) Chewak - who is a hardworking MBA student

That's it. That is the only one I dare to tag as I don't really have that many friends in the blogsphere unless someone came along and say that they should be listed here. Most I know wouldn't want it which make me ask, is tag the new handshake, as you won't really shake someone's hand unless you want to know more about him, especially at a party...

Just a thought

p/s - I won't be sending out email or comment on the 4 blogs/names I listed above as I don't think they would want to play...