Higher cost of living versus expensive tastes.

There’s an interesting article about the state of the property market of Malaysia in TheStar. It talks about how a ‘rebalancing’ is now happening and the ball is in the court of the developers and the authorities. (I do think that the developers are today only launching new units when they are pretty confident that they could sell. Hopefully this helps to reduce the overhang units) According to the National Property Information Centre’s (Napic) latest Property Market Status Report for the first quarter of 2017 (1Q17), launched units of condominiums totalled about 30,000. The overhang issue (unsold units) are actually becoming worse, according to Socio-Economic Research Centre executive director Lee Heng Guie. If everyone thinks the oversupply is due to the higher priced units, it’s not entirely true. 28 percent of the total overhang would be for units which are between RM200 – 400k. (A developer friend shared with me before that many times, the buyers for these affordable units are also not that strong financially. This meant that their chances of getting a home loan approved is even lower, thus he had to sell his affordable units MANY times before it could actually be sold to the one who got his loans approved)  Anyway, do read on as I think the article has quite a lot of good information for us to grasp. 

Everyone kept focusing on higher cost of living. Seriously, if it is due ONLY to higher costs of living, the property market should have collapsed long time ago. In fact, the popular malls would already be empty today. The super wealthy do not need to shop in the popular malls lah. They go to exclusive ones and get served personally. Higher cost of living aside, the only real and tangible reason is because the middle class are spending more than they should and could. This meant that despite having an income which would have gotten their loans approved, they did not have enough savings or down payments to qualify for the unit they want. Furthermore, some wanted units that stretched them to their approval limits. Buying within affordability is not something that they look forward to. Eating is no longer just to fill the stomach and thus, their encounter with higher cost of living is intensified.

It’s true for many of my friends and the funny thing is, most of them would be those who has yet to buy a property. For those who has bought properties, like a senior manager friend of mine drives just a Nissan Livina X which is way below what she could easily afford. She said, it’s enough lah. Her actual home? An apartment WITHOUT facilities. Current market value? RM400,000. She has another condo that she rented out. Market value? RM850,000.  Fortunately, she is also very generous. Just the other day, she paid for all our beers at a 5-star hotel. Look at what we earn, put aside as much as possible what we would invest. The remaining would be for everything else. This limits what we have for spending on what we do not need anyway. Money is really powerful only when we use it wisely. Else, it’s just another tool which will turn us into fools. Here’s what a billionaire said. ‘Luxurious coffee and avocado toasts? Skip it to be rich Happy understanding and start investing.

written on 1 July 2017

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