Friday, September 10, 2010

Property bubble in Malaysia

Diffuse the property bubble before it is too late.

My view
Rising property prices will be a burden to the future generation, especially when jobs are not secure. It is the duty of any government to manage the economic forces, and not leave these matters to be manipulated by some people.
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3 comments:

hyom said...

Wealth generated from rising property prices is not real wealth. Rather than being wealth creation, it is a wealth transfer. It is a wealth transfer from the younger generation who does not own real estate to the older generation who does.

It also does not do the government any good politically if they let a property bubble to build up in the first place. In such an event, if the government pricks the bubble, it will lose votes from people who leveraged up to speculate in properties. If the government ignores the bubble, it will lose votes from young people who complains that public housing has become unaffordable. Then, when the bubble eventually bursts which will surely happen, it will get blame from everyone for incompetence in letting the bubble build up without acting. Whatever happens, the government will lose votes.

I do not think the government can do much about bubbles forming in the private property market. However, I think the affordability of public housing like HDB flats is more within their control. HDB can sell the flats to first-time Singaporean (those who did NS should get priority) buyers at a price which is X% above cost, not X% below market price. By linking new flats to market price, a feedback loop is created which blows up the property bubble in public housing. I invest in stocks, not property because I hate debts. I am not sure if this statement is valid. Anyone disagree?

September 10, 2010 9:40 PM
C H Yak said...

I agree generally with hyom's points.

However, I do not agree with this sentence, "I do not think the government can do much about bubbles forming in the private property market."

The GOVT/HDB is indirectly propping up and speculating to a certain degree ... say by pricing DBSS & EC at quite ridiculous prices. The problem partly lies in the land bidding process.

Read my blog posting @
Link :-
http://de-leviathan.blogspot.com/2010/09/property-bubble-investment-trap-part-vi.html

September 11, 2010 10:37 AM
hyom said...

Hi C H Yak,

I am glad to have a knowledgeable person like you to agree with me generally. Now, I know I am not talking rubbish in an area which I admit I am not familiar with.

The land price was bid by the developers themselves, not set by the government. Even if the government were to set an artificially low price for the land, there is no guarantee that property prices will become more affordable to Singaporeans because the developer can still sell at high prices. The difference being that the profits will be pocketed by the developer and not the government.

September 11, 2010 9:15 PM

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