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The potential property bubble bursting in Malaysia, signs to look out for

Posted in Starting Property Investing

I was invited to speak in Melaka recently. The topic was “What’s happening to Malaysia’s property market in the future?” I shared a few points. Things that are in people’s minds, especially those who have decided that property investment is important but there are still some concerns here and there. I think the most important thing I shared was that everyone should know whether a property bubble is building or bursting soon. There are 4 potential signs and a few early warnings. Learn to see it before analysts write about it AFTER it has happened. Anyway, please count out unforeseen circumstances okay. No one can predict those but based on the signs from all the past property bubbles bursting, the below are four easy to understand signs. The data? Available everywhere.

#1 – Sharp increase in property prices. This is the easiest sign to see. Are property prices still on the way up? Well, according to Knight Frank’s latest report, it is still increasing but the increase has slowed down. Here’s the full article: KL property prices? Still up…. slowly Generally, the world property prices (those they surveyed) are rising faster than Malaysia. In conclusion, the sharp increases in property prices during those 2009 – 2012 periods are no longer happening today.

#2 – Affordability. There are so many property listing sites these days. Just try to search for secondary properties which are RM500,000 and below. The number of choices are aplenty even if it may not be at the area you want. Then, search RM400,000 and below. You would realise that high-rise units choices are still aplenty but again, it may not be in the area everybody loves. Note also to search for RUMAWIP, Rumah Selangorku and even PR1MA. Actually, these affordable launchings would help to pacify the market and these days, even the private developers are focused on affordable units…

#3 – Loan approvals.  I would be extremely worried if every Malaysian I know could get their loans approved. To be frank, many of them drives far better cars than me but they also have intention to buy a property which is very close to their loan limit. I think it’s pretty dangerous BUT these days, many banks are already extremely selective in who gets to borrow from them. In this respect, I think loan approvals have helped to maintain a healthy level of quality borrowers.

#4 -Non Performing loans (NPLs).  Take a look at the image for the NPLs for selected countries. From the U.S which everyone thinks very highly of to Japan, an ageing nation which is struggling to get its citizens to be positive and start spending. I think these numbers tell a lot.  It’s a slide from my presentation. The NPLs would normally go up during a crisis or when a crisis is nearing. As of now, based on the NPL numbers, it is not likely that the crisis should start in Malaysia unless some crazy things happen which scares away all investors. I hope we continue to be harmonious for the sake of all Malaysians, especially property investors. Conclusion? It will not start from the NPL numbers. By the way, assets wise, it’s also pretty healthy. Read here: Household debt Malaysia vs assets, as per Allianz Global Wealth Report

Last but not least, the following awesome additional signs we can see with our very own eyes.

– Unemployment Rate – No jobs, losing jobs….. Unemployment rate.

– Popular Malls – full car parks, queuing for some kind of cheese tarts and etc etc…

Car Sales – overall stats – still up….

Happy looking out for some of these signs and please report to everyone yeah once you found anything. Happy investing.

written on 23 April 2017

Next suggested article: When rental falls, so too would property price

 

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5 Comments

  1. Tan
    Tan

    Thank Charles it is a very useful talk that day in Marina Point,I am one of the audience. I kind of shy to ask that day.

    Question
    1.secondary house,how do you know that house is selling below market value?
    2.what factors to consider when buying house?could it be amenities,safety,public transportation o area there lot of foreign?
    Thank you come to Melaka.

    April 30, 2017
    |Reply
    • Thank you Tan for your presence. 1) These days, it’s easier. We can look up the listings in property listing sites or even brickz.com.my . Call a few of these listings to negotiate with the agents and we would have a clearer number. 2) Buying a landed property? I think this depends where is the city. All those reasons mentioned are important. I personally would not prefer an area with lots of foreigners. Unless of course it’s an area where it’s close to CBD and the foreigners we are talking about would be those from the professional / manager level. Malaysians of any race, I am totally okay.
      Cheers.

      May 1, 2017
      |Reply
  2. […] I would love to read the full paper by IDEAS and understand what’s his (Ferlito) take on the current mushrooming of affordable homes in the country. Also the new government’s policy to complete 1 million new affordable homes within 10 years. In terms of high-end property segment, perhaps it’s best that we talk with the price range because even an affordable apartment at RM400,000 could be a luxury property to many M40 and B40 Malaysians. As for property bubble bursting and the government preparing for it, perhaps just leave it to BNM and the government to handle it when the bubble bursts. By the way, when the property bubble bursts, it will not impact just the luxury home owners yeah. It will affect the whole market’s sentiment and when everyone spends lesser, the businesses would start shrinking too. This will affect the job market which will cause the property market to be even more critical. Hopefully, our BNM and government have a copy of IDEAS paper. Happy following. written on 24 July 2018 Next suggested article:The potential property bubble bursting in Malaysia,signs to look out for […]

    July 25, 2018
    |Reply

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