Perhaps this is a chicken and egg situation? Should I believe that the higher our income is, the more affordable the properties would become? Or perhaps AFFORDABILITY drives property demand instead? Of course, if we happened to be earning salaries within the T20 households here in Malaysia and the home prices are usually targeted at the M40 and the B40, then of course the higher the income, the more affordable the home would become. This is assuming the T20 did not aim at the homes targeted at the T20 which will definitely be priced much higher and in the end, the percentage of salary that the T20 will be using to pay for their homes will be almost the same as those buying affordable homes instead.
In brief, if income of Malaysians are higher today, the number of properties unsold and completed should be on the way down. If this is the case, should demand also be picking up? Personally, I think the current issue of unsold units are due to just 3 things. First one is that the property price is really unaffordable to the many households which wanted to buy that home but the bank refused to approve their loans. Fortunately, this is changing. The new launches are now much more affordable even when compared to just a few years back. Earlier article here: More affordable launches.
Second one is that households are still stretching their home loan limit to the peak; they do not view cheaper homes. That’s embarrassing (in their minds). They view homes which they believe is the BEST MATCH for their current income level. It’s like “I will buy just ONE home in my lifetime anyway…(untrue!)” Thus, it’s either they barely scrape through the loan application or they got rejected by the bank. It’s really important to just listen to our former Bank Negara Governor ok? Here’s that earlier article: Stay safe, buy within affordability and stop bubble building
Third thing is the idea that since property is already so expensive, better not think about it for now. At the same time however, people go for holidays and spent the savings, they bought the latest gadgets to earn the praise from peers and refuse to be seen with a cheaper car because that would tell people that they were not successful. I guess we watch too many movies showing super-duper lifestyle. By the way, in all countries, majority of the population are in B40 and M40 where earnings are concerned. Here’s an earlier article about B40, M40 and T20.
Think about it. This is not something new. Many personal finance guru said we should spend within our means. if we could afford a RM500,000 home, buying a RM400,000 one would give us space to save more for future upgrades. It’s easier to get the loan approved too. Not buying that RM4,800 phone since our current one is still usable will save us RM400 per month for the next 12 months. RM400 is enough to pay for a property which is RM80,000 higher. Last but not least, that 1.3 litre car second-hand car will not just be cheaper by RM15,000 over the next 7-9 years but it will also mean much lower expenses for petrol too. My personal conclusion? Clearly the issue is not just the market but also us. Happy following.
written on 18th Oct 2018
Next suggested article: Higher end properties are in demand. Lively secondary market too.