Unsold units are up in Malaysia property market. Sorry, I failed to mention that it is up a lot. According to many news article yesterday, the number of unsold units as at H1 2017 is worth over RM12 billion. In units, it is about 20,000 units. (Fortunately this is not for affordable units, else, for affordable units of RM250,000 each, then the outstanding units would be closer to 50,000 units) These numbers are actually showing an increase of 40 percent from the same period last year. Most of the unsold properties were above RM500k. These articles were all quoting numbers from the Finance Ministry which meant that the numbers should already be verified. Here is one of the many articles: TheStar: Number of unsold completed residential units up 40% to 20,807 units Okay, does this mean the property market is about to crash? (I received this question from a good friend who is about to buy another property)
Property market crash could happen for a variety of reasons. Unsold units are not usually the main triggering point. One of the trigger point would be if current homes (owned by someone) are all becoming way too expensive for everyone to buy. Here’s an easy to read article about the U.S. mortgage crisis in 2008. Do note the sentence within, “By June 2004, housing prices were skyrocketing.” So, always look at all the major property sites with property listings. (iproperty.com.my, propertyguru.com.my, propsocial.my, mudah.my etc. Oh yeah, kopiandproperty.com has no property listings YET. Haha) Do we see pages after pages of everything way too expensive for everyone? As soon as we notice majority of all listings become too expensive, we better be worried.
Second trigger for a property crash would be when it gets too expensive for owners to service their mortgages. A recent article which is very easy to read highlighting this fact is here. Yeah, it is about interest rates. If central banks for any country in the world raises the interest rates too fast, many borrowers who are already on the edge with their payments may just fall over. Note, “already on the edge” because this is the actual key and not the interest rate. I would be very alarmed if people start telling me this. “Charles, it is so easy for me to get my loans approved even though I am already sinking with my current debts.” This was a recent article. No lending or buyers unable to buy When the ‘quality’ of buyers are met, a mere 0.5% increase in interest rates will not sink the whole market. However, if the market is already full of borrowers who are on the edge……………………
Third trigger would be unemployment. I am very serious about this. As soon as we see mass retrenchments everywhere, across all industries, we should be worried. This is especially if the number of jobs available suddenly drops a lot. Take a look at JobStreet as a barometer. Employers have to pay them to advertise. This is because between feeding my family versus paying for my mortgage, I would choose to feed my family first. So, if I am out of job and could not find a job, I will sell my home and rent a place instead. Imagine if thousands of people out of job suddenly trying to sell their homes at the same time? The sentiment would become very negative and well, the property market (where prices are concerned) may crash. I repeat, MAY.
There are many more triggers. Just ask our best friend, google. Else, go to any upcoming property fair and ask the speakers at those fairs this question, ‘Is the property market about to crash?’ Of course, they would tell you it is not about to crash but what you should be listening for would be the reasons they say so. Then, you use their answers to search more, read more and then make your conclusions. If the answers are not convincing, better take precautions. Including continuing to use our current smartphone and not buying the iPHONE X.
The right strategies I think is to manage our finances well. Peril await without financial awareness. Secondly, have enough savings (usually 6 months) just in case we need a few months to look for a new job. Third, stop buying properties which we could not afford yet. Those that would stretch our mortgage payments to the maximum limit that we could. It is very dangerous. Fourth is to keep reading because if we have been reading a lot, we would not suddenly be very alarmed with some news. Look at the U.S. mortgage crisis, it did not suddenly happen. There were already warnings, signs but everyone chose to ignore it for greed… if you have not yet signed up to read an article or two per day from kopiandproperty.com, do sign up yeah. Cheers.
written on 13 Nov 2017
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