January 23, 2018
What is a property bubble? This is the definition by investopedia.com: “A housing bubble is a run-up in housing prices fueled by demand, speculation and exuberance. … Speculators enter the market, further driving demand. At some point, demand decreases or stagnates at the same time supply increases, resulting in a sharp drop in prices — and the bubble bursts.” In brief, the first sign of a property bubble is actually a continuous and sharp increase in property prices. I have touched upon this in an earlier article here. Spotting signs of a property bubble, 3points (updated) Anyway, before we start to get worried that a property bubble is about to burst here in Malaysia, a prominent property market expert said,“We will not have a ‘bubble situation’ as we strongly believe that the fundamentals are still there.” He is CBRE-WTW Managing Director Foo Gee Jen.
He explained further, “Overall in the market, we have not seen any panic selling happening in Malaysia. Oversupply issues are also prevalent only in certain sub-locations such as in Cyberjaya, where there are concerns over many empty units there.” Besides that he shared that landed homes are still seeing a healthy take up rate of 65-70 percent which means that the demand is positive for this type of properties. Besides that, the market has been supported by the actions from the authorities. Some of these cooling measures include RESPONSIBLE lending and even Real Property Gains Tax (RPGT). Beyond that, the most recent one would be the limitations on the ban of new condos and offices worth at least RM1 million. Foo shared also that Malaysia’sproperty market will be flat in 2018. Foo also explained that, “for the last three years, pricing has moderated about five to eight percent, which we believe is in line with the salary increment of five to six percent during the period.” Foo’s parting statement is a very good one. “Ten years ago we had an oversupply of low-cost houses. Not because there is no demand, but because of mismatch of location. So this is the situation that we are facing. Therefore I urge PR1MA and the rest of the agencies to carry out proper feasibility studies before they launch their products,” he said, adding that some of the residences houses are situated in areas far from infrastructure.” (THIS IS VERY TRUE. Build quality ones, not just focus on quantity…. Not just for PR1MA but also ALL STATE governments too) The full article in PropertyHunter here.
Incomes must rise before property prices could, else affordability is capped. However, this is not usually the case else, the median affordability index would not keep showing a continuous increase. Here’s an earlier article: Median Income vs Property Prices. Besides all these, I think it is worth noting that Bank Negara continues to also try and drive the market’s direction with their available stats. One recent one here: Bank Negara’s 6 policy options. I like them all Whether a flat market is bad or good depends on where we are looking at it from. 🙂 For buyers, this is still a good time. For sellers, well, if you have identified another potentially good buy, then it is still okay. For the over-stretched property owners, then it’s not that awesome. Please remember that for properties which have been completed and still unsold, it may take some time to clear them. Happy following and well, I am on his side when it comes to the question of whether a property bubble is about to burst or not.
written on 22 Jan 2018
Next suggested article: VulcanPost: Malaysian property prices? One expert and 3 insiders’views