Malaysia has a negative number when it comes to household debts vs the gross domestic product (GDP). It was at 89 percent at the end of 2015. Compared to our neighbours, this percentage is indeed high. Based on information from tradingeconomics.com, the household debt versus GDP for Singapore, Thailand and Indonesia is at 61.1 percent, 71.2 percent and 16.8 percent respectively. Let us also look at a few countries which we see in the news media on a daily basis. The U.S., U.K. and Australia? Their household debt vs GDP is as follows: 78.8 percent, 87.8 percent and 123 percent. Yes, Australians owe more than their GDP. As for the question of whether this high number will cause problems such as property bubble bursting, well this is an earlier article. Australia property bubble? 27 experts said, It’s ok. 1 said, “it will burst.”
In an article in thesundaily.my, Moody’s Investors Service shared the following. It expects the household debt to GDP for 2016 to moderate from the 89 percent as at end 2015. In addition, Moody’s vice-president and senior analyst Simon Chen said in a statement, “In addition, the data showed an improvement in the quality of new household lending. In 2016, the growth in household loans was driven by safer housing loans – specifically, loans supported by property collateral – and which exhibited low delinquency ratios, while the growth in riskier unsecured loans remained weak.” Besides that, Moody’s also shared that the slow growth in unsecured personal loans and credit cards also meant that the banks’ exposure to these risky loans has dropped from 15 percent in 2011 to 12 percent at end 2016. Of course, it also shared many other statistics I consider neutral or positive. The full article is here.
Anyway, 2017 is not considered a great year for the property market. We continue to read many reports saying that the approvals for new housing loans are not getting easier. Recovery is said to be only happening next year? If this negative sentiment continues and assuming the GDP growth for 2017 for Malaysia is still between 4 to 4.5 percent, perhaps the household debts vs GDP may drop even further? One point we should note is this. When we get into the right investment, the market sentiment is secondary. This is what Warren Buffet said about investment. “Successful Investing takes time, discipline and patience. No matter how great the talent or effort, some things just take time: You can’t produce a baby in one month by getting nine women pregnant.” Happy believing.
written on 8 Feb 2017
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