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