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/// Banking and Investment News
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BANKING &
INVESTMENT
The Rich Buys Real Estate, the Poor Wants Gold
Malaysian Property Market
Falls 10.9% in Volume,
Rises 6.7% in Value
NEWS
The banking and investment industry has a crucial role
to play when it comes to property. Read about the most
recent news and trends in this trade
HSBC conducted an online survey
to find out about the view of the
Malaysian public regarding property
developments overseas.
According to the survey, 45.5% of
Malaysians invest in properties
abroad for growing wealth, 23.6%
for migration purposes, 18.2% for
family and children, and 12.7% for
retirement. 87.3% of Malaysians also
admitted to being ill informed about
properties overseas.
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www.PropertyHunter.com.my
When making a decision about
purchasing properties in foreign
countries, 21.8% of Malaysians
source information from websites
and blogs, another 21.8% get advice
from banks and financial institutions,
21.8% gather knowledge from
property development companies,
16.4% find out about developments
overseas from family members,
12.7% read about it in newspapers
and magazines, plus 5.5% learn about
it from friends.
Consider the differences
between what the wealthy and
poor believe is the best longterm investment:
legal system; that you will be
secure in that property, and
no one can illegally take it from
you.
I am fascinated each year when
Gallup Poll asks Americans to
choose the best option among
real estate, stocks and mutual
funds, gold, savings accounts
and CDs, or bonds. The results
are a pop psychologist’s dream
of cognitive issues, belief
systems and ideologies. See
the following chart:
Malaysian Invest Overseas to Gain Wealth
If you want to know what
someone’s views of society are,
ask what they believe is the
best long-term investment.
Upper-income Americans are
much more likely to say real
estate and stocks are the best
investment, possibly because
of their experience with
these types of investments.
Upper-income Americans are
most likely to say they own
their home, at 87%, followed
by middle (66%) and lowerincome Americans (36%).
Gallup found that homeowners
(33%) are slightly more likely
than renters (24%) to say real
estate is the best choice for
long-term investments.
Stocks are similar: Investing in
them reflects a long-term faith
that the nation will continue
expanding its production of
goods and services. Stocks are
an optimistic asset class almost
by definition.
Now, before we get into the
details, some caveats: First,
people often don’t really
know what they want or think.
Instead, when questioning
people about their hopes
and desires, we end up with a
distorted mass-media version
of a bad Robin Leach television
series. Sad but true, often we
don’t know what we want out
of life.
Second, survey responses
are not all they appear to be.
There is value in the collective
data, but we need to dive into
the details to tease out some
fascinating cultural differences.
Note what happens when we
divide the survey responses
along income lines. We
discover some very telling
things about the American
psyche.
Now compare that with this:
Lower-income Americans,
those living in households with
less than $30,000 in annual
income, are the most likely of
all income groups to say gold is
the best long-term investment
choice, at 31%. Upper-income
Americans are the least likely to
name gold, at 18%. The wealthy
like real estate and equities;
the poor prefer gold.
It isn’t too hard to figure out
why. Buying and investing in
real estate requires several
things: Steady income, saved
money for a down payment
and decent credit. But it also
reflects a faith in the legitimacy
of the local property laws and
It also is worth noting that
starting a business requires
more than capital; it requires
a specific type of optimism
beyond mere economic hope
of success -- a belief that the
existing economic, legal and
governmental system, if not
perfectly fair, at least isn’t wildly
arbitrary or capricious. In other
words, your business will rise
or fall on its merits.
The Rise and Fall of Gold
More pop psychology:Gold is
more or less portable; it often
can be traded extra-legally. It
is a disaster currency that will
have value even in a Mad Max
era when society breaks down.
Gold reflects a hedge against
the potential collapse of the
existing order; it is a pessimistic
investment.
What do you believe you think?
How would you answer those
questions? Have you given
much thought to what you
actually believe?
The Malaysian property market saw a decline of
10.9% in volume for the year 2013, with 381,130
transactions done compared to 427,520 in 2012.
However, it saw a 6.7% increase in value, with
RM152.37 billion done for 2013 compared to
RM142.84 billion a year ago, according to the
Property Market Report.
It said the residential sub-sector continued to
spearhead the property market activities, taking
up 64.6% share.
“Prevailing low interest rate environment, with the
base lending rate of commercial banks sustaining
at 6.53%, and weighted average lending rate to
5.4% continued to support the domestic property
market,” it said.
It added the Bank Negara Malaysia’s pre-emptive
strategies to preserve household sector resilience
through application of 70% loan-to-value ratio on
third housing loans onwards as well as guidelines
on responsible funding, had gradually impacted
the housing market.
It noted the overhand performance continued to
improve as the number of residential overhang
dropped further to 13,547 units in 2013.
On the contrary, the overhand value increased
from RM4.74 billion to RM4.8 billion in 2014.
On the supply side, completio