Not such a good news for property market, Malaysia

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Malaysian economy is projected to be growing but on a declining mode by UBS Investment Bank. It’s Senior ASEAN and India economist Edward Teather said that the causes include a slowing domestic and investment growth due to the current fiscal restraint, prudent monetary policy and a maturing credit cycle. For 2014, Malaysia would grow by 5.5 percent, dropping to just 5 percent in 2015 and a further drop to 4.7% in 2016. Not everything is negative, the fiscal deficit is expected to decline to just 3.5% of GDP in 2014 and by 2016, dropping to just 2.7%. This meant that the route towards a balanced budget is on track. Consumer Price Index would however grow to 4.2 per cent before dropping back to 2.5% in mid 2016. In fact the policy rates are expected to be maintained from now till 2016. With the current volatile economic environment, I think UBA may be right. Bank Negara may continue the current accommodative stance until the growth is quite certain. Plus, if UBA is right and the growth really do slow down, it does not make sense to raise rates any higher or the grwoth may be even lower. One positive point mentioned is, “The depth of Malaysia’s financial market, current account surplus and external financial asset holdings also put Malaysia in a relatively healthy position to weather capital flows.”

Property market mirrors the economic fundamentals of a country. The property market cannot be vibrant if everyone is worried about losing their jobs. If the economy is not growing fast enough, the income growth would also be stagnant and there’s no way property market can climb up. Climbing down perhaps. So, would the property market be having a slow or slow and steady or slow and declining days moving forward till 2016? Do not be too negative. If we look at the projection, the GDP continues to grow, just that the percentage of growth slows. Then again, once GDP numbers becomes huge, it cannot be still growing by leaps and bounds. My hope is that this projection is a much more conservative one and that it may not be accurate.

Based on majority of the reports thus far though, property market is expected to still be slow for 2015 and not many have predicted a 2016 recovery as yet. One major reason is still contributed by the uncertainty created by GST. My comments here: GST and Property, nothing much, sorry. REHDA which is the association of Malaysian developers has also said that their members are negative for 1H of 2015. Many plans were replanted and sizes reduced smaller to cater for affordability. Based on many of the negative ongoing developments, perhaps UBS’s prediction may be true. Nevertheless, if you are still renting, it’s best to buy now and stop renting. Today, you hold more edge as a buyer than a seller.

written on 11 Dec 2014

Next suggested article: New launches same area, lower priced than previous launches? Post-GST ‘trick’?

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