Is this the time to worry about the property market? Honestly, if you were that someone who bought 4 properties at one go in 2012 and just got the keys to all the 4 properties this year, you should be worried. It’s likely that the prices are going to be weak because there are suddenly so many new units coming into the market. However, if you bought one unit for own stay and you are currently staying or renovating to stay, then the number of unsold and completed residential properties should not bother you too much. If you have a home and intend to buy another good property for rental income, this may work well if you get the right one. By the way, the number of unsold and completed residential units are really on the way up. Article in TheStar here
According to the Valuation and Property Services Department’s (JPPH) latest figures released on Saturday, the total value was RM19.54bil, a 56.44% rise from RM12.49bil a year ago. Should serviced apartments and small offices home offices (SoHos) be included, the overhang value rose to 40,916 units, valued at RM27.38bil. JPPH defines an overhang as completed unsold units nine months after issuance of certificates of fitness, signifying from the authorities that a dwelling is fit for occupation. Most of the overhang were priced from RM500,000 and above and this group alone constitutes 12,000 units. States wise, those with serious overhang are Johor, Selangor, Penang and Kedah. According to JPPH’s latest report, Kuala Lumpur has no unsold completed serviced apartments/SoHos. Article in TheStar here
Three important key points to note.
- Prices will determine affordability and affordability will determine demand. When prices are high, affordability goes down and the demand will have to go down too. This is why huge overhang comes from RM500,000 units or higher.
- Demand is super important. When we look at the major property markets; Selangor, KL, Penang and Johor, we need to realise that as long as urbanisation continues to happen and the states continue to attract “People”, then the unsold units could be cleared with time. The issue usually starts IF we bought an overpriced property…
- Unsold units do not determine the price. The price is determined by attractiveness of the area, the amenities, the design of the home and even the timing. 12-18 months from the keys handover would usually mean lots of supply. Price tend to be lower during this time. Thus, property prices do not drop simply because of unsold units.
In fact, it may be a good time to scout for some good deals if your salary has gone up over the years since 2012 when you bought your first property. Reminder, the mortgage payments may be the same but your monthly salary since 2012 till today would have gone up healthily. With the many choices further ‘pressured’ by newly completed and unsold units, the best deals may just be today. Happy evaluating.
written on 24 Dec 2018
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