January 16, 2014
A picture is worth a thousands words. Thanks to Mr.Michael Geh, Senior Partner of Raine & Horne, we have a very clear chart on the number of transactions in Malaysia from 1H 2010 to 1H 2013. I remembered in 2011, everytime a new project was launched, it was completely sold out within days. It is not just the top developers but every single developer. Not all locations though but majority of the locations. It was like the stock market rush! Of course, for those who bought then, the property may have just been completed or nearing completion. If we look at the number of transactions in the primary market, the numbers went up tremendously. This was not so in the secondary market which almost maintained it’s numbers. These brings us to two possible conclusions for 2014.
Primary market will be flooded with a lot of newly completed properties and thus will face price pressure. This is because if we look at the transactions between 2010 versus 2011 and beyond, it is IMPOSSIBLE that REAL DEMAND suddenly grew nearly 3 times! Now you know there are truths in blaming speculators for the price increase.
The secondary market in 1H 2013 was virtually unchanged compared to 1H2010! How could this be? Well, I think for the past two years, the rush was focussed on primary market leaving the secondary market growing on a gradual path. What’s the average value of the primary properties sold in 2013? The answer is an average of RM317,000. This is not considered very high. However, this is national average and takes into account as well the prices of properties in secondary markets which are without any doubt is lower compared to KL / Selangor / Penang and more recent years, Iskandar.
We can also see clearly why the cooling measures were intensified in 2013. Imagine a property market where prices grow by double digit every year. There would soon be bubble and if it bursts, the economy suddenly grinds to a halt. Property prices fall and yet due to unemployment / layoffs, many would not be thinking about buying a property. Do you sincerely want such a situation? 🙂 That was why I think we should allow the market to really cool down and the prices to perhaps even drop a little. Let real demand and supply come back into the equation. Remember, property investment is for the long run. Prices in 2020 will most likely be higher than today. Along the way though, expect bumps.
written on 15 Jan 2013
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