fbpx
Previous
Next

Advertisement Banner

Too many affordable homes will cause property prices to drop?

Share on facebook
Share on twitter
Share on linkedin
Share on whatsapp
white couch on wooden floor

There are announcements about many thousands of new affordable homes which will be built for the buyers who needed them here in the Klang Valley. It’s a 3 bed room and 2 bathroom (3R2B) and it’s priced from just RM200k. Some people say that this price meant that it’s just a flat without facilities.

By the way, my opinion is that there is no need to have facilities which will require a lot of maintenance after a few years. Plus people seldom use them too and still have to pay for it every month without fail. Maybe a simple garden with some cement chairs which could last a long time and a proper guard house. These cement chairs, get sponsors for them. Their names can be painted at the back of those chairs. Win-Win for all.

affordable homes
Photo by Rachel Claire on Pexels.com

These simple things to me are the most essential. The rest are not even optional. Then there is the question. What happens when the market is flooded with all these RM200k units? Will it then cause the property prices to drop? Let’s look at 4 important things.

#1 Are the target markets the same?

For product A to impact product B’s pricing, then product A would have to appeal to buyers of Product B as well. When there is competition, then there will be a pressure on pricing. There are certainly differences between these simple and new flats versus the many apartments priced from RM400k and has facilities. They are unlikely to be appeal to the same group of buyers.

If they did, I think this is good for the market. More people who may be renting those RM400k properties with a rental of RM1,300 per month may now be tempted to buy instead. Positive for the market as a whole yeah.

#2 Demand is by far higher than these 10,000 or 12,000 or even 20,000 units

Let’s understand that within H1 2020 itself (of which two months were under MCO), the total residential property transactions topped 75,000 units. This meant that the demand is still super big and one main reason people could not buy is that the properties were unaffordable. When we look deeper, then we would know that many of these lower income households within the M40 (click here to know what is M40) are renting.

They are the ones who really need a property instead of keep paying for rental which will mean they remain poor for generations after generations. A simple calculation? RM600 (rental) x 12 months x 30 years = RM216,000. These are their money which they are giving away to the home owner… Their next generation would still have to keep paying this. Help them move away from this for their future please.

#3 Property market is well supported… lah.

Since 2014, we have always been having predictions after predictions that property price for the whole market is about to drop. There were even forecasts with details such as the exact time for it to happen and even the actual % which the price would drop to. Fortunately, all these forecasts did not happen and we still have a stable market.

Looking deeper, we would realise one major reason is because it’s NOT EASY to get a home loan approved. Ask around and one would understand that the banks are super conservative before they approve any new home loan applications. When the quality of borrowers are not just any Tom, Dick and Harry, they will also not suddenly stop paying the their home loans become non-performing loans. (Take a look at the actual NPL status in Malaysia here)

#4 Property prices will drop IF …

These new flats / apartments become an eye-sore in just a few years. This is why MAINTENANCE is essential. This is why MAKING SURE the people pay their maintenance fee is essential. Please put these in place BEFORE the buyers are allowed to buy a unit. TAKE FAST action as soon as someone’s not paying their maintenance fees. This is not the time to be SLOW in acting and in the end, all the owners who paid suffered. It’s actually already possible under law yeah. (Read here)

Conclusion

Just building more of these affordable units will benefit the needy. We somehow must help them so that they could stop making the owner rich. Property is already a cause for poverty in many advanced countries. In the old days, people continue to be poor for generations simple because they were not land owners. Today, people will remain poor when 30-40 % of their monthly salaries are given to the owner of the home they stay for years after years. What I hope is that these units are PLANNED based on available demand for that area and not simply building it when there are NO buyers! Thank you.

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: 7 reasons to drop that thought that property price is falling

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.

Previous
Next

Advertisement Banner

kopiandproperty.com

kopiandproperty.com

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

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 1,471 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: