Recession in 2018 for Malaysia, most sectors down

For quite some time, I have heard of Malaysia facing huge economic distress due to the nearly 90 percent household debt versus the Gross Domestic Product (GDP). Read here: Households Malaysia: Financial assets up RM97.9 bil vs RM70.4 bit debt Today, I read about a bold prediction in an article in freemalaysiatoday.com; Malaysia will be hit by a recession in 2018, with most sectors slowing down except for the palm oil industry. This prediction is by Professor Hoo Ke Ping, a political and economic affairs analyst. (Google his name and read all his articles for more understanding of who he is)   

With regards to property, he predicted that the prices for medium and high-end homes will drop. With bank loans harder to get, the property speculators will tighten their belts. To those looking for a home, he said the next two-and-half years might be the best time to own a medium to high end property. He said the property market are showing slowing signs since 6 months ago with some houses already going foremost RM100,000 cheaper. One major reason is also because it’s harder to get bank loans and tenants have much more choices. Hoo also pointed out that because Bank Negara was slow in curbing the greedy market speculators, the property prices shot up. This has also caused a property bubble with prices artificially increased. He estimated that 6,000 homes in the Klang Valley, 3,000 in Johor Bahru and 1,000 in Penang are still vacant.

He then suggested an idea to Bank Negara. He said that due to this ‘fake demand’ from the speculators, Bank Negara should tighten bank loans for developers and force these developers to sell completed properties at a cheaper price. This is because these properties were built in 2013 and thus prices were already inflated. Selling cheaper would only mean smaller profits. I think new buyers would be happy with this suggestion but for all those who bought earlier, they would be upset. Imagine developers selling at a price which is LOWER than what the buyers paid for earlier? We shall see if Bank Negara would take his advice.

Yes, I think many would now point out that recently there has been reports that 2018 would be the year when the ‘oomph’ period for property is back. Slowdown is happening only in 2016. No? Well, an earlier survey showed this. Read here: Flat 2016? Good 2018, 2019 and great 2020  So, who to believe? Better believe in ourselves. If we have viewed at least 20 units, we would already have an idea if what we are buying has good value or not. Stay focused on areas which we are more familiar with. Pre-determine what we want to achieve in our property investment. Happy investing.

written on 5 May 2016

Next suggested article: New Market High in 2018, property actions today

 

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4 thoughts on “Recession in 2018 for Malaysia, most sectors down

  1. I am also wandering about the direction of the property market lately. So i tried to read the Edge Property last weekend that has key highlights from the recently concluded Real Estate 2016 forum. Two interesting comments that i read:

    (1) JLL Property’s head in Malaysia YY Lau saying the property market will only have U-shape recovery (not V-shape), and it will take a while for the market to recover. The current property market slowdown will be better than 1997 crisis (47% drop in total property value transacted) but worse than 2008 crisis (8% drop) so I guess this probably mean property price will decline by 10-30% if i assume the transaction volume to drop by 10-20%.

    (2) Kenanga IB’s head of Equity research Sarah Lim commented that it may take 7-10 years for the property market to see the next upcycle.

    The above two comments are some of the more bearish views that i read from the newsflow. The comments from Professor Ho may be the 3rd negative view that i read from the public space this year. Frankly, these prediction are slightly more negative than my personal guesstimates. But these expert’s views may have valid points. What do you think Charles?

    Anyway, I am still looking around for property investment, and I must say that Professor Ho is right that house prices are coming down as i personally saw some units that are willing to sell at RM50-100k lower than the price two years ago. I strongly recommend anyone who want to buy a house for own-stay to consider and purchase within the next 12-18 months as it is likely to find bargain deal in secondary market. But things are less clear for investment purpose as the timing of market recovery is a bit uncertain so this could affect the investment returns.

    Cheers, WK

    • Haha. WK, I think we are same side. I m personally more positive than all these estimates. I also believe there are value to b found. Seriously during good times, even developers won’t offer what they current offering currently. But not all offers are equal. Secondary should b good focus too. 50k discount, quite usual… 🙂 buy for own stay first… cheers.

  2. You two taiko are good got 50k to 100k discount on sub sales property unlike me still searching up and down or right to left.

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