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Real estate not just properties. Land too. It seems durian is now one key driver of land prices too?

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Agriculture sector contributed close to 8% of Malaysia’s GDP in 2018. Link to the Department of Statistics Malaysia here. I have no idea how much of this number belongs to durian but I know palm oil will be a significant chunk since Malaysia is the second largest exporter of palm oil in the world. I have a number of friends who believe that durian is that next catalyst for land prices. Well, if only they told me like 10 years earlier? Haha.

10 years ago, a few friends and myself went to view a durian and rubber plantation in Balik Pulau, Penang. It was an 11-acre land planted with durians and rubber trees. The owner who was already old said that he does not want to take care of it anymore and prefers cash instead. He wanted to sell it for RM1.5 million if I remembered correctly. That’s just RM3.10 per sq ft for a land which is ALREADY planted and the trees were already over 25 – 50 years old. The only downside was that the land was not a flat one but a sloping one.

We wanted to buy but NONE of us wanted to take care of it full-time. Sigh… my friends and I did not proceed then. Else, I think today we could have sold that same plot of land for much higher than RM1.5 million, right? Yes, we had good durians when we visited the farm. Hor Lor, Ang Her etc… It seems that the agricultural land will have a good time in 2020.

Article in edgeprop.my here. Savills Malaysia managing director Paul Khong said that agricultural land value is expected to grow in 2020 because of ongoing “durian delirium.” (Delirium means wild excitement… wow) He said that agricultural land value barely rose by 10% since 2014 even with the palm oil prices approaching record highs. Now with durians, he said, “Smaller parcels of land have also attracted wide interest from durian planters, supporting an anticipated uptick in value.” This was among the seven property predictions by Savills for Malaysia in 2020.

Savills director of Estate Agency Kevin Goh also said that the property market will not crash, even if it’s been down for nearly 6 years now. For the past 6 years, he said, “Over the period, more than 1.32 million residential properties have been sold, the Gross Domestic Product (GDP) grew annually between 4.5%-6.0% and the population continues to grow at 1.4% per annum. The market will not crash because it has been allowed to weaken gradually, and there is still an abundance of potential buyers, with relatively inexpensive end-financing available for those who qualify.” Please refer to the full Article in edgeprop.my here.

If Kevin’s forecast is correct, that the property market will not crash, that’s good news yeah. As for durians, let us also be grounded to the fact that lovers of durian is definitely more than supply. However, just like property, there’s that factor of affordability which meant that there’s no way that durian prices can reach the clouds or the sky. In other words, if the yields continue to make sense, we could buy.

However, if the assumption is that durian prices have no ceiling price, then that’s called speculation. And durian prices definitely have a ceiling because when every piece of land which is now planted with durians mature, then the supply will also increase. Everyone will continue to consume more and more as long as they could afford the prices. As for the thought that Chinese consumers will keep paying ever higher prices for it, just remember that all these depend on supply and it does NOT necessary be supply from Malaysia alone yeah. Happy understanding.

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Next suggested article: People say price sure go up, so I buy

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