I read from a Reuter’s report on China’s property market today. Why do you think some of the biggest developers in China are venturing into Malaysia? There is a huge oversupply condition in China’s property market today. Empty units and these days, some developers who just could not find buyers had to stop building and disappear. Some offer up to 25% discounts and this led to the confrontations between the earlier buyers and the developer. Shouting arguments happen in developers’ office and in some cases, clashes happen causing injuries to the home buyers. Fortunately this has yet to happen in Malaysia or would there be a chance for it? Personally, I think not. I think the developers here have already felt the slowdown since 2012 and many have restructured their offerings. Flipping is no longer a common word and perhaps speculation can be better carried out in the stock market versus the property market.
If China’s property market crashes as predicted by some foreign analysts, what would happen? Well, I am not any analyst but personally I think China has enough muscle to prevent this from happening. To me, a crash may not be likely. The government has started to take this seriously. It cut mortgages and downpayment levels for some home buyers for the first time since the 2008 global financial crisis. Main aim of this is to lend support to the sagging property market which may cause the economy to be pulled down too. Cash strapped developers were also given increased financing. This is to ensure the developers can pull through during this slowdown period.
Of course, if we now believe that the empty homes may soon find new owners, it may not be so. Prices spiralled too high previously. Something which we could also see in some parts of KL. Most importantly, the China property market should not have huge changes, either up or down. Prices which are way too high should come down slowly. Some buyers who wanted to flip previously may be willing to sell for a small loss. All these would continue to stabilise the market. This is very important for China and the world because property accounts for 15% of China’s economy and China is the largest trading partners for many countries, including MALAYSIA.
Thus, whatever is happening outside Malaysia would definitely have a bearing on what happens next for Malaysia. Overbuilding will bring with it lots of problems. Especially the non-stop spiralling of increasing prices. Bear this in mind when you buy. Buying is risky only when you knew next to nothing when you sign the agreement.
written on 4th Oct 2014
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