Advertisement Banner

Distortion of property values when prices are artificially inflated.

Share on facebook
Share on twitter
Share on linkedin
Share on whatsapp

There was one recent article which talked about distortion of property values. It was about cashback and The Association of Valuers, Property Managers, Estate Agents and Property Consultants in the Private Sector Malaysia (PEPS) president Michael Kong says that those who inflate prices to make cashback offers aimed at enticing homebuyers must be closely monitored by the authorities. He shared that this has been a long time problem in the real estate industry. Please read the full article in freemalaysiatoday.com here.

distortion of property values

As this was an interesting topic, I have also gotten the views from FIABCI President (Malaysian Chapter) Sr. Michael Geh. He gave his frank opinions as below which I think reiterates to us again that ALL stakeholders who are involved must play a part in eradicating this potential longer term issue if this is allowed to continue. Potentially property prices may become higher because of the price expectations if people were unaware of the effects of cashback. Geh shared the following:

“When the practice of CashBacks are in the Rm20k to RM50k with the Moral of assisting the homebuyer with little cash to purchase & move in everybody in the Property & Banking closed one eye.”

“But today the Practice of CashBacks puts From RM100k to RM1 Million into the pocket of the Property Purchaser, by  Signing a Higher Sales & Purchase Agreement & guaranteeing the Loan Amount.”

“This Practice Creates a Distortion of Property Values of the Subject Project and artificially inflates the market value of the subject property.”

“In an economic downturn The Market Values of these Newly Purchased Properties can tumble up to 50% & this will create ripples of Problems for the Banking & Financial system. Therefore The Banking System must make a stand on this practice in order to preserve the quality of mortgaged asset values before it this problem becomes chronic  beyond  salvation.”

Everyone needs to understand yeah, money cannot appear from the sky. Banks want profits, they would not give you free money. Developers need profits, they would also not give you free money if they have to lose money. Real estate agents? They need their commissions too and definitely will not give you a cut from their commission when you buy a home.

Still wondering where the money comes from then when someone hands you a huge cash back? Where you need not pay anything but get money back? It could just be distortion of property values and this could be dangerous yeah.

If quick profit is the sole reason to invest, then I tell you for the 1,488th (simply put a number) time , property investment is NOT one of it. There are so many of those super fast kind of returns even if I am not sure how to call that as an investment yeah. Happy investing, really!

Love to be updated of investment news? Sign up for KopiWeekly. (once per week for property, finance, investment news and more)

Please LIKE kopiandproperty.com FB page to get daily updates about the property market beyond kopiandproperty.com articles. Else, follow me on Twitter here.

Next suggested article: Investment is aimed at replacing our day jobs?

1 thought on “Distortion of property values when prices are artificially inflated.”

  1. Great read. There are many ways to create short term ‘value’ only to draw down a far bigger amount from the longer term. In short, negative equity. Some buyers are unaware, so your article is highly beneficial. Some understand and choose to roll with the Artful Dodger, confident of gaining on another’s loss.


Leave a Reply

This site uses Akismet to reduce spam. Learn how your comment data is processed.

We love to hear from you (Facebook Comment)

LIKE us for property news update, FREE.


Advertisement Banner



kopiandproperty.com is everything about property related writings and news. Enjoy reading with a latte.

Advertisement Banner

LIKE us for property news update, FREE.

Property investment news everyday? Subscribe for free!

An article a day, keeps updated all the way.

Join 1,528 other subscribers

Property investment news everyday?

An article a day, keeps updated all the way. Subscribe for free!

join the family

Like us for daily investment news and more

Hit the like

%d bloggers like this: