This is an article for working professionals working in Kuala Lumpur with a good monthly salary but still face limitations where property prices are concerned. Too many areas which we love but we could not afford. Too many areas with cheap price tags but we do not want or worried if the cheap price we bought into will remain cheap forever. In the end, we think of settling for the easiest decision; renting into a very nice place in a very nice neighbourhood since the rental which we will need to pay will be below the mortgage.
#1 – Will property market be depressed forever? If the decision is to rent forever, then please wish that property market will be depressed forever yeah. Else, once recovery starts and more people starts buying, the prices will move up and so would the rental. Rental seldom moves ahead of property price because fundamentally, that’s not how it happens. Rental is determined by price because no one would want to rent below their monthly mortgage unless they have no choice. This is why when good market returns, rental will also return to their usual place which is slightly above the monthly mortgage. Right now, tenants have upper hand.
#2 – Will population growth slows down for Greater Kuala Lumpur? Image shows the current population growth for Greater Kuala Lumpur. From 1990 all the way to 2019, the average is around 200,000 new people every year. In other words, demand is definitely growing even if the current market where rental vs price does not really show it. Graduations of fresh graduates are also continuing. A couple of hundred thousands of them actually, every year. Even assuming just 50% of them actually move to Greater Kuala Lumpur, the demand is still continuing.
#3 – Can mature / popular areas get bigger? There are two ways to buy a property in a mature and popular neighbourhood. #1: we hope that prices in these mature / popular areas suddenly drop a lot and no one wanted to buy. If it dropped but many wants to buy, then prices will move up very soon. #2: Somehow our monthly salary grows much faster than the property price. If this could be done, yes, you will get to buy into that mature / popular area very soon as it will become affordable to you. Not to everyone because their salary may not be growing faster but for you because your salary growth is faster than the property price.
#4 – Will out of city places ever be popular? In case, one has not been outside of Kuala Lumpur postcode for many years, perhaps good to travel a bit. Puchong is no longer just Puchong… It is now much bigger and seems much closer to Cyberjaya and Putrajaya too. Seremban may have been seen as mature and aged but Seremban 2 is definitely vibrant and new. Sungai Buloh is definitely not just that new village today yeah… Just google for BRP Sungai Buloh and one gets 717,000 search results today (10th June 2020). These are just the usual few examples, there are more. Changes are definitely happening further away from the city as well, not just within the city centre.
#5 – Will property prices go up or come down? Actually, this is not even the right question to ask. Historically, drawing a line will definitely show an uptrend. However, the most relevant question to all of us, whether we own or do not own a property is this: Value of Money. Is the value of money going to become bigger every passing year or will the value get smaller every passing year? The fact is, we get increments because the value of money is getting smaller. Thus, if we work for 5 years without any increment, we would realise that we could buy fewer and fewer things! When value of money gets smaller, the price goes up because for the same property you will have to pay more…
For those who now thinks that perhaps it may be better to buy versus keep on renting and making the owner ever richer, you may be right. For those who think better rent so that I can save more money and use it to invest into higher return assets and not property, you are also right. However, to those who are renting and NOT saving money and investing, you are definitely going to be wrong. To those who are simply buying just to escape from renting, you are also wrong too.
Okay, for those who are already super-wealthy and renting or buying is not even an important question, do not think so much. Just enjoy your life because life is not just about property. It’s about being comfortable too. Until that day though, do think about saving, investing and protecting what you have. (Read here). Hope these 5 questions could get us thinking. Else, please send me more questions yeah.
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