85% faced dropping sales in H1 2014, pessimism to persist till Q1 2015

85% of developers face dropping sales in H1 2014. This was revealed by Real Estate and Housing Developers’ Association (REHDA) Institute after their Property Industry Survey for H1 of 2014. As for H2 2014, 20% felt optimistic with the property market outlook. This dropped further to 13% for the first half of 2015, when goods and services tax (GST) is implemented. According to Rehda president Datuk Seri Fateh Iskandar Mohamed Mansor, main issue for buyers was getting their loans approved. Rejection rate is very high. In fact their survey showed that rejected loan applications was 30% and this is for buyers of homes priced between RM250,000 and RM500,000.

Some of the cooling measures which impacted the housing market include the doubling of real properties gains tax (RPGT) to 30% as well as the cancellation of DIBS where developers pay the interest for buyers during construction period which is said to be the main cause for property speculation. The soon to be implemented GST at 6% is also another main issue too. ‘Realistically, prices of property prices cannot go down’ said Rehda president Datuk Seri Fateh Iskandar Mohamed Mansor.

Personally, I do believe post-GST, there would be uncertainty in the market and many may choose to wait till the dust settles. Fundamentally, nothing has changed though and if prices no longer rise like previously, I think sooner or later, genuine buyers would come back. While I agree that prices could not come down but I think this is over a longer term. In the medium term, the developers better be prepared to launch projects which are more affordable. Comfortable may be a better word than luxury. For high rise developments, needed facilities like a playground for kids and swimming pool may be more important than ‘wanted’ facilities such as sauna which costs a lot to maintain. For landed ones, perhaps smaller and higher, thus ensuring overall price can be as low as possible.

One more important real fact, perhaps ONLINE should be preferred over the usual traditional media which costs huge money and truth is, not even trackable in terms of effectiveness. Tell me frankly, how many of you remember the name and the price of the properties shown on billboards along the roads that you pass everyday. Truth is, you would remember ONLY if you have interest. In brief, buyers market will continue for a while more for new properties while for secondary ones, if it’s currently really undervalued, I think buyers should buy soon. Prices of properties may not go down is not entirely correct but prices per sf definitely cannot go down too much, or else no developers would build.

written on 11th Sept 2014

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