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Borrow less, stop price appreciation and economy becomes stronger

I agree with the following statement tremendously. “My judgement is that in the current environment, the resilience of our economy would be enhanced by an extended period in which housing prices and debt outstanding increased no faster than our incomes” It’s a comment by Reserve Bank governor Philip Lowe. (Australia’s Reserve Bank)  If you want to read the full article, it’s here: ‘Borrow less to keep economy strong’  It’s not just Australia but even the U.S mortgage crisis could have been averted if the authorities did not let everyone borrow as much as they want and the prices of properties spiralled out of control into total “unaffordability” (my term) and then ‘kaboom’ Here’s an article about ‘kaboom.’  Of course, it’s quite hard to imagine Australia facing the same situation because as at today, the sovereign rating for Australia is still perfect. Fitch, Moody’s and Standard & Poor has assigned it AAA. Higher than even the U.S and China. China’s rating has been cut recently because its economy has slowed down. 
Before we start to say but if we borrow less, then the economy would slow down, well that’s not true. How about if we borrow to set up new businesses. Borrow to expand our businesses. Just do not borrow and keep pushing house prices ever higher. Definitely do not borrow to invest in such ‘sure get rich very quic’ schemes. Warning here: Just got cheated? Well, no end in sight   Where properties are concerned, there are still choiceslah. Not as good looking, not as nearby to that favourite mall etc etc etc. Not everyone needs to stay in those few hotspots. Not everyone should borrow till they reach the maximum they could borrow. Remember, risks are high when debts are very close to what we earn. This was what our former BNM governor Zeti said which I think will always be true. Stay safe, buy within affordability and stop bubble building  
The only reason why prices would keep rising for some properties is because people keep queuing up to buy those same properties. These days however, banks have their own valuation and that loan that we want may no longer be 90 percent but may be lower, even if it’s our first property. Actually, when banks lend us less money, they earn lesser interest payments. Thus, it does not make sense for them to lend us less money UNLESS they feel that the price that we are okay is actually not okay to them. If they feel it’s risky, should we not take heed? Anyway, as at recent months, banks are still earning good profits. This meant that they are still lending more and borrowers are still borrowing. Recently, a few more banks have also announced better profits. Earlier article here: Cheap money, pessimism and banks’ profits – let’s learn  Bear in mind, regardless of country, when prices of ALL properties becoming unaffordable to the masses, the huge drop is coming. Happy deciding before buying.
written on 31 May 2017
Next suggested article: Be careful with property investment today

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.


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