Malaysian Property Market: About To Burst?

Read an interesting Malaysian Insider report:-

Is the property market bubbling over?
While Napic does not have a housing affordability index, a rough calculation shows that the average price of RM212,815 is about 4.4 times that of an average annual household income of RM48,000. The average price of a KL home is now a steep 9 times that of the average urban household income of RM54,000 and a possible sign that the market is headed for a bubble.

A housing bubble, fuelled by easy credit can typically last for years before bursting. Experts were early by 2 – 3 years in predicting the recent subprime crisis in the US. Could we be on the onset of one?

Definitely not the same sort of scale.

Property prices are not high, at least by regional comparison. But looking at income levels and rental levels, they are.

Banks exposure to real estate loans are not that big; 20%- 30%. Home prices didnt appreciate that much, hence it is unlikely that there would be defaults significant enough to hurt banks. The unknown here is loan standards, were they compromised? Only time will tell.

Unlike the US, there weren’t any leveraged funds or ‘money market’ funds that funded these purchases via short term debt, so risks of any sort of funding run is almost nil. I dont think interbank market will be too affected.

Low-ish odds of happening but with devastating outcomes is not something we should be betting on. Which suggests that BNM’s move to raise interest rates so far, and increase LTV (if jadi) is good policy. Nip the overheating at the bud.

Still, I have seen how ppl get around the maximum LTV limit. It’ll be interesting to see how this plays out…

Sleepless-ness II

3rd post for the night (or morning). This has to be some sort of record. No prizes for content though, but who cares..

All I wanna say is that, I am still awake. And, I was right, there is a frothy housing market somewhat here. Not a bubble, but certainly frothy.

And wtf is this?

SHAH ALAM, Sept 1 – Shah Alam MP Khalid Samad said today that he supports the federal government’s decision to give out “duit raya” for civil servants but pointed out that the payment would cost more than RM900 million, which is more than the RM750 million the Najib administration had saved by cutting subsidies this year.

Typical. Robbing Peter to pay Paul. Undilah kerajaan Barisan Nasional.