November 25, 2017
Will the property prices drop from RM500,000 to RM300,000 in a few months time? Vulcan Post referred to Mark Chua’s FB post, “If property prices really drop from RM500k to RM300k, buying a property will be the least of our bloody concerns. The average Malaysian will have other f*cked up problems to worry about; namely plummeting consumer confidence, lower retail spending and higher unemployment!” Mark Chua was a former senior banker of 17 years.
Frankly, what he said is totally logical and something which I wrote about many years back when a friend who has just one property told me that he will invest in property when the market collapses. That was way back in 2009. My answer to him, “You dare not buy now, you mean when the whole market is down, when everyone is out of job and trying to look for one and you dare to step into the market and buy a property of a couple of hundred thousand ringgit?’ Anyway, he has just one property today. I truly believe that the best time to buy is when we are ready to buy and the best property to buy is the one that meets our expectations. This meant that we must have the right expectations and not thinking that property investment is the fastest road to riches. It is not. Perhaps the casino or even the stock market is.
Coming back to Vulcan Post’s article. They dropped me a couple of questions and my views were published together with two more prominent property people. Here’s the article in Vulcan Post. They have a lot of awesome trendy article pieces. Do check them out yeah.
— Some interesting excerpts of the article —
There have been a lot of opinions and speculations going around about the property market recently. One catalyst of discussion was an article published on Free Malaysia Today titled “Property market will be badly hit in 2018, says expert
“Cheong expects the prices of houses to fall from RM500,000 to RM300,000.”
On top of that statement, Putrajaya announced that it will be putting a halt to approvals for shopping complexes, offices, serviced apartments, and luxury condominiums priced over RM1 million in the city—only to tell us that the halt “isn’t absolute“.
Since the initial article, a particularly insightful post written by Mark Chua—a senior banker of 17 years—has been making circles on Facebook. A particularly captivating quote from Mark is:
“If property prices really drop from RM500k to RM300k, buying a property will be the least of our bloody concerns. The average Malaysian will have other f*cked up problems to worry about; namely plummeting consumer confidence, lower retail spending and higher unemployment!”
Makes sense, but we wanted to hear more insight from other insider voices. So we reached out and got answers from 3 industry insiders who live and breathe property.
What do they think about predictions of the property bubble bursting?
Gadiy Lim is the founder of Bumbung—a Malaysian startup that facilitates the match between agent and potential buyer. And he is inclined to disagree with the theories of a bubble burst in 2018.
“In my opinion, the cooldown measures this time round have got to do with affordability, as most property projects are targeted towards the above average instead of the lower average income for Malaysians.”
Wong Whei Meng is the founder of Speedrent, an app that matches owners with potential tenants, instead of buyers. And he thinks that this is all about the imbalance in supply and demand.
“Media has been reporting this for a few years now—most of the properties built were geared towards high-end projects. The public at large couldn’t afford this. I believe the high-end projects are the ones have highest risk of property burst.”
On whether a RM500k property will drop to RM300k—”I don’t think it would be this drastic on secondary transaction,” said Whei Meng.
This is true for him even if he thinks that “investors who do not have strong holding power are willingly to let go at lower price to avoid auction”.
A member of property media has also weighed in on this. Charles Tan is the Chief Editor of kopiandproperty, an independent property publication based in Malaysia.
“Just look at the listings in major property sites. If every single listing is all above RM500,000 then I think the crash which is expected may be coming true.”
“Else, it meant that there are still choices, coupled with ever more new affordable launches by the state, federal and even private developers.”
A sudden crash in property price might seem great for someone who is ready to buy, but a crash won’t happen overnight.
“In my opinion, oversupply of units, especially those of RM500k or higher is not a main trigger point. The reason is because most buyers are aiming at properties below RM400k, and not these expensive/luxury units.”
“This is the reason why developers are now focusing their attention on affordable homes.”
Instead, Charles points out other trigger points that can contribute to a bubble burst.
Can buyers comfortably pay their mortgage, or will even a slight increase in interest cause an inability to pay?
Unemployment: if they can’t find a job, then they’ll miss their mortgage payments, or outright sell their property at much lower prices.
“On a larger scale this will affect the sentiment of the whole market,” said Charles.
“Even when approval was given for a new development, it will not affect the property market suddenly because a development would still need typically 3 years to complete,” said Charles.
Meanwhile, ongoing projects and what is already on the market continue to lead to this oversupply quoted by the Finance Ministry.
“I don’t think public at large would be affected by this. After all, these developments were not targeted at these segment of market,” said Whei Meng.
Instead, developers now have to rethink their strategy and start building houses that people actually want to live in, like modular homes.
“Investors should take it positively as it controls the new supply into the market (albeit a little late, but never too late),” said Whei Meng.
“It’s still uncertain as to what projects are being held back,” said Gadiy. “The impact could be huge depending on the number of projects that will be placed on hold along with the number of purchasers that have already bought the place.
For the longer term, as long as the economy continues to move and we don’t have any sudden external shocks, Charles thinks that this halt is a positive for the market. The oversupply would be on a downtrend.
“Apart from sentiment (whether positive or negative), there are no huge changes statistically actually.”
Meanwhile, Charles is a little skeptical of the rise of “sharing economy”.
“Some are using UBER or AirBnB as an example but seriously, I believe Uber drivers themselves would prefer to own a home instead of renting while AirBnB is expanding so fast because of owners who were renting out their homes.”
Despite this, Charles notes that rent economy has been predicted even in countries outside of Malaysia, and this has been ongoing for years. It still won’t stop people from buying, though, even in advanced property markets.
“If there are people willing to rent, then it’s better to be the owner and not the tenant. However, let’s understand that right now, tenants are happy because choices are aplenty due to the oversupply of units.”
He also voiced his support for renting schemes by the government for the people, because these affect a different segment of the population.
“Everyone needs a roof over their head if they are to continue to work and support themselves, their family and ultimately the economy. I hope every stakeholder would take note of the recent 6 policy options from the Bank Negara Malaysia.”
— end of article — TO read the full article, click here.
Hope everyone is clearer that when property prices drop drastically, that is a crisis. During a crisis, property is not even going to be the main thing we think about. It’s more of survival; keeping our jobs, minimising expenses etc. Happy viewing and buying ONLY when you are ready.
written on 24 Nov 2017
Next suggested article: The potential property bubble bursting in Malaysia, signs to look out for