Soft market does not mean buyers jump in (it’s not the area they want!)

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What are your thoughts about the property market of Malaysia for 2018, 2019 and perhaps 2020 and beyond? Is this the time to be fearful? Or is this time to be greedy? Warren Buffett said this with regards to investment. “Be fearful when others are greedy and greedy when others are fearful.” So, is the time now to be fearful or to be greedy?  With regards to the property market, this is what real estate consultancy firm Rahim & CO international Sdn Bhd is saying. It says that the downtrend since 2013 is still continuing for 2018. Its Executive chairman Tan Sri Abdul Rahim Abdul Rahman said that despite this downtrend in number of transactions, the value did not drop much. He said, “This shows that prices have not gone down so much as opposed to the number of transactions. Although developers are under pressure to lower their prices but they can lower their prices so much only after taking into consideration cost of building.” The full article in TheSunDaily here. 

I think the next thing that Rahim & Co research director Sulaiman Akhmady Mohd Saheh shared may not be agreed by everyone. He said “An average terraced house would cost Malaysians 5.3 years of their household income.”  (What he meant is that assuming someone in M40 earns about RM100,000 per year (RM8,000 plus per month, this person can afford to buy a terrace home that’s just slightly over RM500,000. There’s no such home in SS2, Desa Parkcity or even Kelana Jaya, for example. However, he said AVERAGE, so perhaps that would still make sense in some cheaper areas because even today, as long as one is willing to make a little sacrifice, landed terrace homes, even below RM500,000 are still available lah)  

Rahim & Co further shared that from its research, Johor’s housing affordability rose to 3.9 years, from 3.7 a year ago despite transaction value falling in the state, while Selangor’s and Penang’s remained flat at 5.2 years and 6.9 years respectively.  Meanwhile, it’s 8.4 years for home buyers in Sabah and for those in Kuala Lumpur, it’s 6.8 years of household income. In fact both Sabah and Kuala Lumpur showed slight improvements in terms of affordability. Rahim shared that 2018 property market will be flat but will not gointo a recession.  For a full article, please do refer to thesundaily.my article here.  

It’s pretty obvious that what Rahim & Co is sharing is that the market is flat. There has also been an oversupply of some types of properties too. The continuous downtrend in the number of transactions started in 2013. Then, why are buyers not jumping in yet? What are they waiting for? Perhaps this would better explain the reason why. There’s a mismatch of the demand and supply coupled with negative sentiment (mostly uncertainty). Last but not least would be the fact that MRT is not yet popular as at today despite it passing through many newer neighbourhoods. Acceptance of these newer neighbourhoods are not there yet. Buyers still prefer the usual areas preferred by most of their friends / buyers currently. I think all these would require time. Not so much of doing something but more of slowly getting people to accept it. Affordability would definitely help in driving this because in many areas, RM550 per sq ft is not possible to build and yet in some areas, there are still many below RM500 per sq ft even today. I love property market because it’s so vibrant. Happy noticing something ahead of others yeah.

written on 20 Feb 2018

Next suggested article: Understand WHY we buy, not why others say must buy

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