How much could property prices in Penang grow to? What about Greater KL? Perhaps to the government, how much should it rise to? Perhaps some form of control instead of just leaving it fully to the market forces of demand and supply? The reason is because sometimes the numbers from overseas look scary. One such estimate comes from Singapore, an island bigger than Penang. Singapore’s largest bank, DBS has forecasted that new private homes will cost an average of between S$2,300 (RM6,803) and S$2,900 (RM8,578) per sq ft (psf) by 2030. The main reason is due to the population which is expected to grow to between 6.3- 6.5 million from the current 5.8 million. In Singapore, the citizens could apply for HDB flats which are by far cheaper than the private ones. Currently, the prices are at S$1,500 psf. (RM4,436). The full Article in todayonline.com here. My earlier thoughts about the population factor here.
In numbers, this meant a compound annual growth rate of 1.5 per cent to 3.2 per cent over the next 12 years as growth in homeowners’ incomes “keep pace” with the rise in private-property prices. (Yes, only 1.5 percent per year, compounded… Now do we wee the reason why property investment will help a lot in hedging against loss from inflation?) The report also projected that the average size of new private units to shrink to 840 sq ft by 2030. This will be 20 percent smaller than the 1,083 sq ft average last year. (WOW… 20 percent smaller. I know, someone wants to tell me that this is because families are smaller. FYI, it’s because of PRICE. Smaller families are still going to buy a bigger home if the price is the same as a smaller one… ok?) The DBS report assumes also the annual volume of transactions for private homes to stay above the historical average for the next 12 years – reaching between 13,000 and 16,000 units until 2023, before tapering to an average of 12,000 to 13,500 units. An earlier article about how property prices change due to transactions.
The main reason could be due to HDB upgraders as well as a “wildcard” coming from property-buying foreigners. Based on the report estimated, there is a significant supply of land available to build a further 1.3 million homes. It says, “The Ministry of National Development (MND) has put in place a land-use plan which will cater for the longer-term growth in Singapore’s population. According to the Master Plan 2030, an additional 3,000ha of land is available and is planned for residential use by 2030.” Beyond just units, these new homes have a capacity to support another 3.8 million people. As for the other side, risks such as slower population growth, immigration policies, and macro-economic uncertainties could potentially throw a spanner in the works, the DBS analysts noted. Please do read the article in TodayOnline for reference yeah.
Before everyone starts calculating how much their property would be worth here in Malaysia, I think it’s important to note that these are predictions. It is also based on many other inputs including even the economic growth for example and even the political stability which I think Singapore is famous for. Besides that, the SIngapore government supplies the affordable homes in much larger quantities than the private homes. As for Malaysia, the government is attempting to build 1 million homes within 10 years and this can be considered to be higher than what the private developers could build. Perhaps this will help to stabilise the property prices even after the positive sentiment in the property market has returned? This is my personal view earlier. It’s best for prices to stay stagnant for as long as possible, so that incomes can catch up. Happy investing.
written on 21 May 2018
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