Can home prices go up by double digit per year? If it seems unlikely, then let’s look at it from the number perspective. Briefly, a RM400,000 home becoming RM450,000? This is already an increase of 12.5percent. So, in number, it’s actually possible because people do not think too much about an extra RM50,000 divided over 30 years because the final total is only RM200 plus extra. (Same number of years, same interest rate and same 10 percent downpayment) Then, we add in the fact that demand is far higher than supply for some areas. These transactions would push up the median prices and as usual, will also help other cheaper areas to also move up. In Hong Kong, the home price was up 16.7 percent for the whole of 2017 from the already extremely high median prices in 2016. Full article in TheStar here.
Home prices would usually push up rentals even if the effect is not immediate. According to the same article, rents are also up andfor the whole of 2017, it rose 7.89 percent. According to analysts, the property prices would continue to rise another 5 to 20 percent in 2018 because of HIGH LIQUIDITY and a severe supply-demand imbalance. This was an earlier article quoting the HIGH LIQUIDITY. Why prices in HK still up Currently, Hong Kong has already one of the most expensive property markets in the world. It has an average of HK$12,100 (RM6,036) cost per square foot, according to property agency Midland Realty. On the prime Hong Kong Island, the average cost is about HK$16,200 per square foot. This is the full article again. There are definitely cheaper homes, for example for the same price but for a bigger size, think further away from the island. As long as one is willing to spend 1.5 hours travelling daily, the choices would open up further even if prices wise, it is still not considered as affordable.
HIGH LIQUIDITY is quite bad. It creates a lot of demand simply because people could afford to outbid others who could not. This is the reason why cooling measures can help slow down the increase but at the same time, that imbalance of demand vs supply needs much more work. It’s not just building ever more homes unless these homes are acceptable to the people needing one. Accessibility, for example. Acceptability is another. Well, hopefully the Hong Kong government could solve this sooner rather than later because without access to homes, the youths would suffer high rentals which will make it even more unlikely for them to save enough to buy. As for the older folks, growing old without a proper roof over their heads is going to be many years of demeaning lives. The richest few could do something about it perhaps. Happy following.
written on 1 Feb 2018
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I notice price beyodn RM 750k houses quite stagnant…but house prices below RM 500K start moving the price higher and closer to RM 750K. This mean maybe 5 year from now RM 750k house will move to RM 1.5 mill to be fair on the value since lower grade scaling up the price. As per maybank report loan Below RM 750K is the most and between RM 300K and RM 500K is the larget group of approval . This manage to create good demand for housing which are ignored all this while. For example my apartment unit i purchased in 2008 for RM 125K , price stagnant not moving for almost 9 year till last year it is start moving to RM 160K, then RM 190K then RM220K and today around RM 300 to RM 350K. I were regret at the beginning since i purchased in bandar sunway and everyone in Kota damanasara chearing very big leap in price movement…guess is my time now….for waiting patiently…there are people asking my house for RM 400K…maybe this also could explain why price moving up in certain segment…it is all about liquidity at that time which also easy loan or not….anyway my landed unit purchased in year 2012 for RM 872…stagnant like hell now..cannot move in price..i guess can clear by 2023 with doubling the price..
Great to hear Aziz. Good buy for you! As for price, it will have to follow affordability. RM1.5 million will only b reacheable for perhaps top 5% of Malaysians.
You are right on the affordability. Which i too have the same concern on my landed unit when i purchased the house. But looking at all statistic for past 20 years on property affordability changing over times. Next 7 to 10 years affordability range maybe at around RM 500 to 850K which maybe around that time not much property at this price any more unless for very small unit and super far from city. And depend on how easy loan can be obtain. Western world money printing (due to any economy crisis which always happen in cyclical mode) will be flooding Asian bank and pushing up asset price due to easy money. Possible to double in price. A year ago I-property make survey comfortable price for landed link/superlink price are up to 1.5 mill , means lot of room to grow more. And i too have concern on top 5% who can buy this kind of house, but believe that will grow over time and there many upgrader and downgrader too in market. One thing i learn in stock investment which i try to apply in property world, find a stock with loaded spring effect means Price to value divergence are big enough and once gain momentum it will be massive price movement. Another thing i found based on historical chart, property never been cheaper and it is always like 100 times median average income at that time. And affordability are always the table talk for every past decade and decade to come.