Are you waiting for property price to drop?
I know, many say property prices have fallen or are still falling. One viral news many months back even said that the property prices will fall by a number which is really unbelievable. It did not happen yeah. Oh perhaps not yet happen? However, for anyone who does not have any property yet and is still waiting for the price to drop to a level which is considered “cheap” then do read on yeah. It may be best to drop that idea that property prices will drop, a lot. 7 reasons as below.
#1 – Salaries will be rising (maybe not in 2020). I know, someone wanted to say that the fresh graduates are having almost the same pay today compared to 10 years ago. Well, today, there are by FAR more Malaysians earning salaries of over RM5,000 compared to 10 years ago. Today, there are also by FAR more Malaysians earning over RM10,000 per month than 10 years ago. Keep learning and move upwards. This is why these people earning higher could afford to pay higher.
#2 – Costs will still be rising (even if inflation looks like it’s close to zero). I am not sure about you but I remember long time ago, cement was cheaper than today by many times. These days, there is always the threat of cement price increase. Land prices was also a few ringgit per sq ft long time ago. Today, even in Rawang, the land price may be RM40 per sq ft. If it’s a small plot and it’s nearby KLCC, it’s safe to assume that the price per sq ft may be in the thousands.
#3 – New catalysts will continue to come. Let’s remember those times when there were NO Petronas Twin Towers and KLCC area. Prices were cheaper… Let’s remember those times when there were no MidValley Megamall. Remember those days when The Curve and IKEA was not yet in Damansara? How about areas with popular LRT stations today and future MRT stations? All these continue to push attractiveness of a certain area and when demand increases faster than supply, prices move up.
#4 – Urbanisation and the fact that median age at 29. In case we wonder why prices in major cities rise faster than small towns, that’s because of career opportunities. When more people graduate (over 350,000 tertiary graduates per year), they will move to the major cities such as KL, Penang, JB and KK to work. Demand for properties will grow. Assuming one landed home could be rented out at RM500 per room and there are 4 rooms, that’s RM2,000. The property price which used to be just RM200,000 will now double to RM400,000 because new buyers use rental yield as a benchmark.
#5 – Preferences continue to change. Somehow people think a high-rise without facility is a no-no. Somehow people looking for landed wants proper gated & guarded homes. Somehow if they could afford, they also want a clubhouse or for high-rise, they want two car parking slots or more. Beyond a small swimming pool, they want a very well equipped gym and a landscaped park too. All these meant that the cost per unit will rise and this will push up prices too.
#6 – Malaysia is a follower for property market. ( I am happy for this particular point) th Frankly, if the property prices in advanced property markets had stayed stagnant without any movement, our (Malaysia) property market prices would have stayed the same too. However, when the whole world moves, it’s hard for Malaysia not to move. Every time people talk about affordability and they look at Australia, Hong Kong and even Singapore, we are actually nowhere near them yet.
#7 – Owners hate selling at lower prices. I have asked listeners of my talks this question many times. ‘Would you sell the property you bought at a lower or a higher price?’ The answer is 100% YES for Higher price thus far. Let’s remember that prices move up or down when there are transactions. If owners are selling higher and developers of the same township are also selling slightly higher every time they launch new projects within the same townships, then prices move higher. I have not heard of any developer selling ever lower every time they launch something new. If you know, please tell me!
There are many other reasons but I think 7 is more than enough to tell everyone that property prices will only be dropping when there’s a financial crisis. Well, there was the 1998 financial crisis and the 2008 sub-prime crisis. During the 1998 financial crisis, home prices dropped by double digits! Nope, the double digit did not start with 2. It started with 1.
Today, prices have already recovered and moved higher than 1998 or 2008. If a financial crisis do happen again for example, the prices may again drop but the question we should ask ourselves would be, ‘Would we recover?” If the answer is a YES, buying is still safe. If the answer is NO, I have no answer for you. Invest into something else yeah. Happy believing.
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