A good friend forwarded to me this article in TheStar: unsold properties on the rise Inside the article, my friend Warrick Singh was sharing about a group of property club buyers asking for his help. They were aged between 28-42 and most of them bought two or three property units 2011. They received the keys in 2014 or 2015. Warrick shared, “They bought the properties based on what they were taught about the good debt versus bad debt principle, that buying properties is a good debt.” Warrick shared that these buyers were disgruntled now because they are unable to rent out the units to meet the monthly mortgage payments and they do not want to sell at a loss, although some have done so. They are also unhappy they have to pay for the monthly management charges and sinking fund.
Warrick shared with them about the property clock. Some call it property cycle which is roughly every seven to 10 years. He said, “Prices will not be down all the time. Just as there is a peak, there will be a bottom. That is the first thing buyers must understand. So timing is important.” In fact what is happening now is that current situation will need more time to get settled because the number of unsold units continue to rise. National Property Information Centre’s (Napic) Property Overhang Report for the second quarter 2018 showed Malaysia’s unsold and completed units at 29,227 units, valued at RM17.24bil as at June 30, 2018. A year ago, it was 20,876 units, valued at RM12.26mil. Earlier article here on unsold units.
Warrick believes we are currently at 7 o’clock (of the property cycle clock), while the Institute for Democracy and Economic Affairs (Ideas) senior fellow and economist Dr Carmelo Ferlito is of the view we are currently between 3 and 6 o’ clock. Dr. Carmelo Ferlito has predicted a property bubble bursting and has asked the government to just let it burst but just be prepared for it. Beyond just Warrick and Ferlito, here’s another version of where Kuala Lumpur is based on property clock. There’s also a much earlier version of a property clock here. Perhaps this is the reason why it’s not that important to debate where we are on the property clock. To read the full article, please refer to the article in TheStar here.
For many seasoned investors, looking at the property clock may provide some clues as to what to expect or even the action to be taken. To most Malaysians,especially first-time home buyers, it’s even more important to understand WHY we are buying in the first place. If it’s because of our father-in-law asking us to buy before getting married, then we better buy. Haha. However, if we are thinking of buying and then flipping, then this may be easier done through the stock market and it’s by far faster too. As for those who are just looking at an affordable property, likes it and could afford it, just proceed. The property clock is not a show stopper and it should never be. There’s no need to question if prices will rise or not in the future. Here’s an earlier article: Will affordable home prices rise? Everyone’s clock in terms of income versus property price may be different. Happy taking action.
written on 20th Oct 2018
Next suggested article: Positives, indirectly showing the potential for Kuala Lumpur