House prices rose 9.1% yearly since 2009. Oh dear…

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I would like to reiterate that the reason we have cooling measure is to ensure the prices cool down. It is not to push prices down because existing owners will get very sad if their home prices drop and banks will start to have cold sweat if the valuation for all their existing home loans drop. I think it has worked because the home prices did not jump like that few years; 2009 – 2012 period. Remember yeah, if our typical yearly salary increment is still 5% per year but the typical home prices rise by 10% every year, I do not think the property market is able to sustain itself very long. However, according to Khazanah Research Institute, the Malaysian house prices have risen by 9.1% YEARLY since 2009.

Article in nst.com.my here. Khazanah Research Institute (KRI) said that house prices have increased 9.1% yearly since 2009 and no significant improvement on housing affordability was seen between 2002 and 2016. (Briefly, it’s a TOUGH situation) KRI also said this deterioration is due to unresponsiveness of housing supply to effective demand. (Briefly, the supply DID not understand and match demand) KRI said that an explanation is needed between prices and construction costs because construction costs have only increased slightly when compared to home prices. (I think KRI needs to also look at the fact that home prices are rising because the buyer is willing to pay higher. Frankly, if I could not afford to pay higher, regardless of how good the owner is on negotiating, I will still not pay…)

The Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS) disagrees with KRI’s view. It said that the prices are rising because of an overall housing policy and down-the-line aspects for inflated home prices, and not valuation and valuation methodology. PEPS advised the Housing and Local Government Ministry to sanction advertisements for houses in primary market to carry the actual price. It said that the incentives and rebates must be detailed out in brochures for transparency. PEPS added, “Banks and financial institutions are doing their best through proper market-based valuations to discover this price and to lend based on the real prices so that in the event of a loan default, they do not get lumbered with unsaleable properties at auctions.” Article in nst.com.my here.

I think the argument by PEPS carry more weight. As an owner, I would advise potential buyers to compare the prices of similar homes within the same area before buying. That ‘money back’ offer is NOT something new but if the prices are already higher than all other surrounding homes by 20% and now the discount given is 20%, may the potential buyers please be aware of the significance? Not having down payment is an issue because sometimes, the potential buyer is trying to buy that perfect property and over-stretching their ability to buy. Thus, they could go for Rent-To-Own schemes instead? However, if we keep having more and more people over-stretching themselves, I think the term sub-prime is not too far ahead in the future. Happy understanding.

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Article written and edited by Charles. News article summarised by Dina Batrisyia.

Next suggested article: 10 reasons why we will fail to buy a property

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