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Thursday, November 3, 2011

Malaysia Property Market Crisis

With the gloomy world economic outlook all around, everyone is in doubt on what's going to happen in future. As global economic crisis affects everyone, including myself, I studied and found some information to share.

US Financial Crisis Explained

Spanish Housing Bubbles

Global Financial Crisis Explained

The information is all around the internet and everyone is still repeating the same mistake. The way I look at it, Malaysia is also very close to what's happening in the world. With the salary level frozen, housing price increase exponentially and inflation is everywhere. Money is getting more and more worthless everyday and people are not happy. Fast cash manipulation from the market is not sustainable, and will eventually lead to collapse.

With the housing price increasing in such a manner, everyone thought it's a gold mine and invested in it hoping for a good flip, similar phenomenal like stocks crisis in 1997 when even roadside beggar also invested in stocks. But salary didn't increase, where the money come from? Of course the bank, and to qualify for a house loan with a small salary, the bank decrease the lending rate to BLR-2.4% to attract home buyer / investor and allow 40 years mortgage! When in history it happened before?

If everyone is genuine home buyer then it should be sustainable, but investor intended to flip is the majority. They borrow beyond their limit gambling to flip the property. Been successful so far, so they follow same strategy and buy with eyes closed. When the bank reached their limit and stop borrowing, the demand for housing will decrease as no one is buying anymore, the housing price stagnant or maybe decrease. Investor couldn't sell the property nor afford the loan, so they burnt and default the loan by declaring bankcrupt. Bank tighten up the criterias and chain reaction will bring down the entire property market. Property market collapse will eventually bring down the entire economy as people and bank have no money. It will lead to economy crisis and fall into recession.

I only wish people will come to their senses and earn money the traditional way. Earn an honest salary and be an investor, not gambler. If want to be gambler betting on property, might as well go bet in casino. Faster results. Wish luck.

1 comment:

Unknown said...

This doesn't seem to have any effect to our country

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