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Property market will be ‘slowed’ down if it has been moving too fast

Property market will being ‘slowed’ down if it has been moving too fast.

DIBS, once upon a time

If you did not know, once upon a time, everyone can buy properties. Not property yeah, I wrote properties; more than one unit easily. It was called Developer Interest Bearing Scheme (DIBS). Google for it to read more if you like. The property market became speculative and DIBS was banned.

Loan application, once upon a time

My good friend who’s a mortgage expert, Miichael Yeoh told me that once upon a time, the loans were all based on gross pay. Today, all the loan applications are calculated using net pay and if commission is involved, the bank will only take 50% of that number or lower into calculation for the loan approval. Again, this is to ensure only the ones who could pay the loan actually gets the loan.

Now, China property market will start to have curbs.

Article in bloomberg.com Chinese authorities look set to tighten property sector policy and tame prices this time, in order to reduce wealth inequality and boost the falling birthrate, economists led by Lu Ting wrote in a report Tuesday. Policy makers will be willing to sacrifice near-term economic growth to tame house prices and divert financial resources out of the property sector, which accounts for a quarter of China’s gross domestic product, they wrote.

“Markets over the near term need to be prepared for a likely marked growth slowdown, more developer defaults and home foreclosures, and perhaps some turmoil in stock markets,” the economists wrote. Please do read the full article with more details here: Article in bloomberg.com

Wealth inequality because of property?

Every time people tell me that our food price is more expensive than Hong Kong when we look at salary versus food cost, I will explain slowly why the food price is really secondary in terms of cost of living if they are my good friends. In fact I can say the same for many other major cities too, especially the ones where the property price has reached an ‘unreacheable’ level for many.

If they are not friends, I will just nod my head and smile. Please always remember, the reason why poverty continues to happen in many countries throughout the world is because of property. When people could not afford to buy one, then they will have to rent. When they have to rent, usually they will be at mercy of the owner.

Rental will be forever

That’s not all, all the rents they pay, no matter for how many years or how many generations are all lost. Imagine paying just RM1,000 for rental but it’s for 10 years? That’s RM1,000 x 12 x 10 = RM120,000. This one we assume the person rents a very small property and rental stays the same for 10 years. What happens if this rental is over 40 years? What if it’s for generations?

This is why I disagree that property market is left to just the market without government intervention yeah. Happy understanding and hopefully China is able to control the property market and help more people own a home too.

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com 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. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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