Property market issues of today, explained.

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Every time I think an article is good, I will share with all. Here is an informative article in thestar.com.my by Thean Lee Cheng here. It’s a long article but it’s worth reading as it has the views of many prominent experts. The few issues Thean mentioned in her article includes a residential overhang that goes into billions of ringgit, stubbornly high house prices, oversupply of houses in wrong locations and high household debts. Let’s chat a little about all these issues she mentioned in an easy to understand manner yeah.

Residential overhang. Cambridge dictionary says this about the word ‘overhang:’ something that has a negative effect on a situation. (click here to read if you want) The example sentence is reflective of the actual situation. “Prices are unlikely to increase while there is an overhang of 40,000 unsold new houses.” Thean has thus used the right word instead of oversupply which is not reflective of the actual demand for affordable properties. Earlier article here: Oversupply = unsold,true. Unsold is NOT oversupply, TRUE. Let’s understand that the current Home Ownership Campaign (HOC) all over the country is aiming to reduce this overhang number. Hopefully we will see a clearer picture after June 2019.

Stubbornly high house prices. Let’s understand that once someone buys a property at RM400,000 it is highly unlikely that they will sell their properties lower than RM400,000 unless they were unable to service their mortgage and had to sell fast. The government of the day wants to ensure more people have a roof over their heads at an affordable price but this is NOT by pushing down the property prices which has been transacted. That is why they are building the necessary instead of pushing down prices of current homes. The banks have their exposure in the housing market and they will be worried if all the properties suddenly drops in price. This explains why house prices do not drop just because there’s a slowdown in transaction numbers since 2013.

Oversupply of homes in the wrong location. Homes in some wrong locations may be remedied with connectivity. However, if the homes are in terribly wrong locations, I do not think there’s a need to look too deep into the issue. In fact these should be indicated clearly in the UNSOLD numbers so that people are not too alarmed by all these super huge numbers of unsold and super huge numbers of unsold values. I think all media should be objective in highlighting these as well.

High household debts. Sometimes, it seems that Malaysia is the only country with high household debts. By the way, our number is around 85%. Australia’s at over 120%. Canada’s at 100%. New Zealand is over 90%. United Kingdom is still higher than us while the U.S. at close to 80% now. What is extremely important to look ensure this number moderates, the rate of unemployment continues to be low and there are very little speculative activities pushing up property prices. Finance Minister Lim Guan Eng said the household debt is under control for 2019 with stable income. (click to read) As for speculative activities, please do try to buy an overpriced property today and see if the bank will just approve the loan as it is… (banks due their due diligence seriously)

Please do read the full article in thestar.com.my for even more comments from prominent experts. I think everyone just wants everything to become better. The public meanwhile should have more information which they could understand and digest. Only then will those who has sufficient savings to buy a property will buy. Only then will businesses which are holding back from investing due to uncertainty, will invest. Only then that the economy could be driven by domestic demand and not remain too subdued due to never ending negative sentiments prevailing in the market today. Objectivity is more important than negativity. Happy following and understanding.

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written on 10 March 2019

Next suggested article: Property prices do not change just because asking prices are dropping

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