I think there are lots of property choices in the Klang Valley. SMSes are sent to me every few days of a good offer. Well, when the property market slows, the developers need to really step back and decide what should they build. I personally believe all developers are building based on their own forecasted / predicted demand from the public. For example, the number of registrations for interest would have given them some clue as well. Hopefully there are no or very few developers who are still building simply because they believe the market would absorb everything they build, regardless of type, price and location. According to CBRE/WTW’s managing director Foo Gee Jen, more developers are moving into the affordable segment. Full article in themalaymail here. I believe everyone should own at least the home that they stay in. This is so that they have something to fall back on when they no longer work in the future.
Foo also explained that property remained a more popular investment destination in the country than most other sectors. (He did not explain how he derived this conclusion but I think its safe to assume it’s due to the value of a property. We do not buy RM500,000 worth of unit trusts but we do buy a RM500,000 home) He also shared that if the demand was not present, then developers would have no choice but to discount. This is especially true for some high-end products which are not selling. This is main reason why the developers are moving into the affordable segment instead. He said the demand for small and flexible offices (SOHO/SOFO) will fall by up to 15 per cent compared to 2015. This decline in demand would last another three to four years. With Malaysian buyers becoming ever savvier in the properties that they buy, itwill be ever more challenging for developers in 2017. Three other reasons are also not on the developers side; weak ringgit, commodity prices and markets elsewhere.
When developers themselves are moving into the affordable segment, there are two things we should pay attention to. First thing is that for buyers, the opportunity to buy a more affordable home is more possible. Choices are definitely increasing. Time to make a choice if primary market is where we want to head to. No idea if we should rush but do note that the current cycle is one of gradual decline in property prices. An analysis by UTAR here. Second thing is the demand and supply equation which will affect future property price appreciation. As there are many similarly priced properties, it pays to be more objective when we choose. The reasons ‘WHY’ is now more important than ever. Property prices would always be based on demand and supply. However, if we are going to hold the property we buy for many years, then even the usual inflation rate increase would help the property prices tremendously. For example, a RM400,000 home with a 2% increase every year is still RM8,000 per year. RM8,000 per year is still an increase of RM666 per month. How many Malaysians have an increment of RM666 per month recently? NOTE: LONG TERM ok…. Property is not for speculation. For that, go to the casinos. It’s faster. Happy investing in one.
written on 21 Jan 2017
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