We should always worry about property bubble potential right?

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Yes, I am worried with advanced property markets when their markets have way too high property prices and their banks with way too relaxed lending. Hopefully they can learn something called ‘Responsible Lending Policy.’ 🙂   Anyway, when prices too high and lending too relaxed are combined together, disaster is sure to strike, sometime in the near future. There are some signs actually. ‘When borrowers need not even qualify for it, better be fearful!” Reminder, even if there are no strong predictions of a property bubble bursting here in Malaysia, anything happening in some faraway country is sure to affect sentiments and when it’s affected, the market reacts negatively. Anyway, if the banks did not simply lend and buyers did not simply overstretched themselves, then the effects from these ‘disaster’ will be mild. Just look at the 2008 mortgage crisis? Well, that was also the time when the property market in Malaysia started its momentum upwards…

We are fortunate because since 2012, three key things happened. First would be all the cooling measures by Bank Negara Malaysia (BNM) which meant that speculators or the less than spectacular investors are no longer able to buy many units all at once. We must be worried if a junior executive in some company could buy 5 units of condos all at one go? Second would be the push towards affordable units. From the federal government to the state governments and even private developers themselves, just look at the market today. The number of sub RM400,000 units are aplenty. Remember yeah, markets cannot crash when there are plenty of affordable choices. Here’s the four signs to know if a property market is about to crash. Third is the fact that with all these slowing downs, the prices has sort of corrected somewhat and has also allowed incomes to catch up a bit. Buyers are also savvier and more objective because now they have more time to THINK IT THROUGH. These days, buyers do not flock to properties which they deem to be too expensive versus the size, location and design anymore. So, it’s either the properties are selling very fast (when the requirements are met) or properties are selling very slowly.

What’s upcoming then? Well, there’s that General Election which has definitely stopped many purchases from happening. Secondly would be the potential of property bubble bursting in some advanced property markets. Just google “property bubble” and start reading a bit. Third would be the unsold unit numbers which will provide a barometer for the health of the property market mismatch which is said to be causing the number of unsold properties to rise. If it continues to grow, it meant that the units are still not what the buyers need. If the unsold numbers start to reduce, we know that demand is greater than supply which is a good sign. If the unsold unit numbers stay stagnant and at the same time prices continue to inch upwards, we know that whatever launched was sold and buyers are willing to pay premium for certain locations. (including buying from the secondary market since the supply for some of these areas may not be increasing). Happy following and nope, we are not looking at a crash due to some internal financial matters. If a crash is to happen, it will start externally.

written on 27 April 2018

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