Households Malaysia: Financial assets up RM97.9bil vs RM70.4bil up in debt

household debtsFirst, let’s talk about potentially a bad news. Malaysia’s household debt-to-gross domestic product (GDP) ratio increased to 89.1% in 2015. It was 87.9 percent as at end 2014. Read here: Household Debt Malaysia? Better In other words, the household debts in total is actually worsening. Want to know what some other countries are doing? Well, take a look at the chart beside. Malaysia really is the highest among all the ASIAN countries listed. The full article accompanying the chart is here: cityam.com – debt-map  Well, before everyone start withdrawing their money and keep them under the pillow, do note that Bank Negara Malaysia said that the ability of the households to service the debt remains sound. It added, “This continued to be supported by a broadly stable domestic employment and income outlook.” Economy? Read here: Malaysia in recession? Not in 2015

Household-debt-in-2013-The-top-10-as-of-GDP_chartbuilderIf we look at that few countries that Malaysians love to buy properties in, I think the picture is a whole lot clearer that if we are to keep our money under our pillows, there are also other countries which are in similar predicament. Among them, the UK, Australia and closer to ASIA, it’s South Korea. Let’s just hope none of these countries spark anything serious because any ‘fire’ starts, it will spread quickly. Just as positive sentiment quickly pushes up transactions and prices, a sudden overflow of negative news would create lots of fear and frantic selling may start. Perhaps not stretching too much is a better strategy for now? Read here: Stay strong. Shed the depreciating debts

For households with incomes of less than RM3,000 a month, their share of borrowings continue to drop from 28.4 percent in 2013 to 24.3 percent in 2014 and 23.6 percent in 2015. Whether this is good or not would depend really on whether it’s because they save more or actually spent more due to rising living costs, thus have less need to borrow in order to purchase a home, for example.  The household balance sheets remained healthy as financial assets grew faster than debt in 2015.

A positive sign would be the rising household wealth which is estimated at an annual growth rate of over 11 percent over the past five years as more households bought properties for many reasons including to help finance children’s education, provide some financial security for the next generation and prepare for retirement, including medical costs. Household assets-to-debts ratio remained above two times which meant that we are at a strong position currently to withstand sudden shocks. Bank Negara said that the banks have sound underwriting standards and risk management. I think this also meant that loan rejections are high. Read here: Jan 2016: Whopping 62 percent loan rejection 

Last but not least, over 80,000 people, half of which earned less than RM3,000 a month went for counselling from The Credit Counselling and Debt Management Agency. Let’s note that overspending is the worst case scenario when the living costs are rising. Opting for cheaper options are always better than to buy first and regret later. Overspending to enhance image is very Sxxxxd. Oh yeah, where bankruptcy is concerned, it’s very clear that property may not be the main cause. In fact, it may help one from spending on unnecessary too. Read here: Bankruptcy before property, not after property perhaps   Happy following.

written on 24 Mar 2016

Next suggested article: Yes, it’s definitely safe for a very long time yet

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