I do not believe majority can buy RM900psf, sorry.

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A close friend again asked me about a condo in a hotspot. It’s around RM750psf and her agent is telling her that this hotspot is worth buying. There are not that many of these around anymore. Majority of the condos in the area are already at this price if not higher! My answer remain the same, ‘Would she buy the property in future for 20 percent extra? RM750 x 20% extra = RM900psf. Anyway, I did not repeat my answer. This time, I told her to rely on her own research and evaluation instead. I know she could not accept my “secondary property” mode currently. So, I do not wish to cloud her judgement if the luxury condo is her cup of tea. There are definitely some people who may buy from her in future. The target group would have to be pretty wealthy too.

I do not think the property market of Malaysia would suddenly rebound anytime soon. Not even if some of the cooling measures were removed or the sentiment turns positive. The reason is because I feel that the affordability is already stretched to its limit. There’s really not that such a huge group of Malaysians who can easily buy properties priced above RM800,000 or RM1,000psf. If demand suddenly rebounds and the prices continue to charge ahead again like 2009 – 2012 periods, I think this time the property bubble may be real. Demand remain very strong even if subdued by negative sentiment but that’s about all.

Nothing will force people to buy a 1,000sf condo for RM700,000 or higher today when there are lots of choices around RM500,000 or lower today. This is especially true for secondary areas which are not hotspots. As for that few hotspots, I wish you luck if you still think they are worth that extra premium. For your sake, I also wish you are right. As for Malaysia’s property market’s sake, the rise must now be orderly. Perhaps slightly above the typical inflation rate but should never ever be double digit. Majority of Malaysians do not have an increment of double digits, so who can support the prices of properties when it is increasing in double digits?

For hotspots which are popular today, it should still be popular in future. Reason? Location and distance from the city centre. There’s no way to replicate another Mont Kiara in Semenyih for example, unless the centre of KL moves closer to Semenyih. That’s why different areas would have different attractions and needs a different set of evaluations. Be reminded that luxury condo is priced that way because there are many people who does not wish to stay in an older and less favourable area. However, secondary areas would also rise in price because urbanisation is continuing and we have something called inflation. As for the majority of Malaysians? Not all would be able to afford RM900 per sq ft.

written on 20 July 2015

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