Bubble, Bubble, Toil & Trouble

Castles in the Sand

It sure is a scary time to contemplate buying a house. If one were to believe the articles on the 'Global housing bubble' being bandied about recently, one would think that in 5 years time, all our houses would have depreciated to circa 1997-1998 levels and we'd be forced to live in a wooden box while feasting on rat droppings.

Although the above scenario might be a bit far-fetched (who eats rat droppings anyway?), it doesn't detract from the fact that there are a lot of uncertainties brewing in the property market. I was actually thinking of getting my hands on an affordable lot myself by this year. I went to property fairs, read through housing journals, talked to friends in the property business and did everything else a normal person who wanted to buy a house would.

The one thing I learned from my house-hunting activities is this (those of you who have read my previous posts would find this familiar), properties nowadays are bloody expensive! In fact, according to several sources, the price-to-rent ratio of our houses and condos are at a 30-year high! If that isnt an ominous sign, I don't know what is.

In fact, this article in the Economist noted that the total value of residential property in developed economies rose by more than USD$30 trillion over the past 5 years, to over USD$70 trillion, an increase equivalent to 100% of those countries combined GDP! They likened this scenario to the makings of the 'biggest bubble in history'.

Sounds scary doesn't it? But wait a second, what do the house prices in developed countries have to do with us in little ol', third world Malaysia? I don't want to get into the specifics, but just know this - If they are screwed, We are screwed.

Ahhh, the beauty of globalization.


So how now brown cow?

This might be just another case of many chicken littles running about screaming that the sky is about to come crashing down on our heads, then again it might not. As for me, since my name doesn't begin with a 'Tan Seri', I think I'd sit pretty on my cash hoard (yup, all 100 ringgit of it) and wait this one out.

After all, better be safe than sorry right?