Malaysia’s property market is a small one. Mostly local buyers. In fact the secondary cities are not even considered by most of the property investors. Well, in China, even Tier-3cities are undergoing rapid changes. Some have prices which are increasing faster than other more established cities. Sometimes, we would ask why are the prices still going up if these Tier-3 cities are nothing more than just hometowns of young people who has gone to bigger cities for work. Aha, that’s the reason, actually. Young people who has gone to work in bigger cities! They will earn more than what they would if they had stayed behind. Yet, what they earn may not be that sufficient when it comes to buying or enjoying what the big city has to offer. They may then think about working and earning and then in the future perhaps retiring in their hometowns. Why not? Even I think like that.
There’s one article in TheStar saying just that. Full article here: Real estate booms in China’s small cities, but construction outpaces demand In brief, it was saying that there are demand for housing in these third-tier or fourth-tier cities but the number of new homes being built is still much faster than demand which is the reason why despite surge in demand, the inventory has only dropped slightly. Some numbers were quoted. It says that about 550,000 homes were sold in 27 Tier-3 cities from January to May 2017 and such numbers should have reduced the inventories by 45 percent. It did not and the inventory has dropped just 7.1 percent. Despite this small drop however, the property prices were still rising. The property prices in a Tier-3 city like Bengbu would only be 10% that in Beijing or Shanghai. A two-bedroom apartment of 90 sq m (970 sq ft) would cost about 675,000 yuan (RM429k) before tax and this is around 12 years of average pay in the city. Lots of other interesting facts too. Just read the article in full here.
Some time back I wrote about the reason why property prices in Ipoh could grow despite that fact that it is an ‘ageing’ city. It’s my favourite place to be but I couldn’t move back currently if I am talking about having more career opportunities. My aunty had just bought a condo for over half a million. This is considered a crazy price even today because many Ipohans would tell you that their landed property which they bought some time back was nowhere near half a million. They would also tell you that condo is not the lifestyle of Ipohans who prefer to talk to neighbours or walk around their neighbourhood. Seriously, I stay in a condo and my wife knows so many housewives here. My kids run around the playground and park within the condo everyday, if it does not rain. As for my aunty, staying alone meant safety is key plus the fact that she has worked in KL meant that she is already exposed to far higher prices than just half a million ringgit. So yes, I seriously think the more people move out of their hometowns, the higher likelihood that their hometowns would have more home choices versus if no one moves out. Happy loving your hometown.
written on 30 July 2017
Next suggested article: Spotting signs of a property bubble, 3 points (updated)
