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HBA: Buy property later, price is falling.

National House Buyers Association (HBA) secretary-general Chang Kim Loong said that buyers should wait because the cooling measures by the Bank Negara Malaysia is working. At the very least, hold on the purchases till next year. He specifically mentioned that the tighter lending rules and related measures are achieving their desired impact. Prices have gone down and is expected to go down further. In fact he asked buyers to focus on secondary and auction properties instead. He also shared that any investor clubs are now rushing to sell their properties at lower prices as there were no takers and predicted that the number of foreclosures should increase because of this desperation.
I do agree with him that prices have stayed almost stagnant and in fact for the luxury segment, for those overstretched, prices definitely is coming down. Looking at the REHDA’s recent comment would tell us the same picture of unsold new launches, especially high-rises. Focussing on secondary meanwhile must also be on less prime areas. This is because if one were to look at those hot areas, even the secondary prices are still crazy in my opinion. No comments on the investor clubs trying to unload their properties. I have always been against any speculative purchases irregardless of whether they are clubs or individuals. When one is lucky, speculating may bring huge returns. When the timing is not right, that’s the end of the game.
He explained the property prices before the Bank Negara measures had a steep climb spurred by excessive speculation. As for the new properties, it is not just more experience but also developer controlled despite the lower construction costs. (Note: REHDA members in a latest survey said the costs of construction have gone up.) I think it’s best to let both sides say what they wanted to say and see who would be able to influence the market better. If you look at the type of properties being launched, I think it’s clear that there are many more launches for those priced around RM500,000 compared to just 2 years ago when everything seemed unbelievably high.
I think the construction costs vary between developers but the most important would be the gross margin that the developers are aiming for. Perhaps the best aim currently should be a lower aim and faster selling. This is especially for those who bought the land many years ago, actually the prices they can sell can also be lowered too. It does not need to be higher than the market value of that particular area. Sell fast, build it, get the profits and move on to the next. Not the best time to keep delaying by selling at higher prices and then offering rebates, discounts, special renovation packages or whatever. Information is very transparent, I can find out when was the first time that the project was mentioned before and I can immediately know how long have you been selling your “selling fast” properties today. This is no longer the ‘newspaper’ days of yesterday.
HBA has also forwarded several new recommendations to the government before the Budget 2016 announcement. They include higher stamp duties corresponding to the number of properties owned and making mandatory the Build-and-Sell scheme as decided in 2012 but was put on hold. The utility companies should also be building the utilities and not factor in the costs of those onto the developers because this will in turn be factored into the final house prices.
If approved, I think the higher stamp duties would apply to me in my next property purchase. Let’s just say that I am neutral in this. The Build-and -Sell scheme is indeed a good one but as soon as we look at the gearing ratios of many of the listed property developers today, we would notice that majority of these would have to cancel at least half of their projects today. Some of those huge developments by developers without deep pockets may have to be cancelled too. I would still prefer for current situation but the buyers should be educated to reject stupidly priced properties; especially those who offers you ‘Zero Entry Costs.’ This education part is not easy but I think I am also trying to bring this up in my articles.
Last but not least, do not believe REHDA’s warning totally that prices would always be increasing. For your information, when prices are way too high that no one can afford, they would have to change their plans. Do not just wait for prices to fall as per HBA. This is especially if you are waiting for prices in those very preferred hotspots. For these areas, demand is way too high and supply remain almost the same, prices are unlikely to fall much. Buy based on affordability and buy to stay first. Happy deciding on who to believe though I prefer that you believe yourself.
written on 26 Sept 2015
Next suggested article: Supply continue dropping, prices should start increasing 
 

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Charles Tan The Founder The Writer Kopiandproperty
Charles Tan

Charles is Founder of kopiandproperty.com He writes from his investment experience for the the past 20 years in investments including property, stock, unit trust and more as well as readings and conversations with many property gurus in the industry. kopiandproperty.com is an independent property blog which is not affiliated to any media company, property developer or even real estate agencies.

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  1. Hi Charles,
    I think no price falls for the basic houses, like terrace and semi-D. They definitely not selling below cost. If we want to determine the property value, just calculate roughly the developer’s cost to build them using our own calculation. Of course if we are locals in town, we should know the cost. Then if the price is acceptable, go on buy! Don’t ever buy the much higher than cost because it will spur speculative moves after that.
    The BNM’s move to stricter the loans was solely to contain the total loans in the country that’s moving at a faster pace than GDP. Not because the housing price is way too high now. They also go on personal loans as well. If they can stop all new loans, they will, but they won’t do that haha..kidding.
    Higher stamp duties for properties is not good as it is our rights to own the better or later bigger ones. Don’t punish the wrong person! The government should flood the market with all the building materials and when it’s cheap then the new property price will go down, as per Khazanah exec. suggested. Even for the affordable houses built by the government still costly for some and slightly lower quality than the developers.

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