‘Too’ hot property market is not good lah. Cooling momentum is good breather.
Hot property market?
Malaysia property market is nowhere near hot. However, there are countries where the property market has been hot for sometime. One of it would be Australia. It has been rising in double digits and that is definitely not a good sign because salaries do not rise by double digits. Do read here for the earlier article. Property prices must not rise as if there’s no ceiling…
Article in nst.com.my Australia’s housing market advanced for a 13th straight month, even as signs mounted of a potential cooling ahead in response to worsening affordability, increased supply and the withdrawal of government support.
Residential property values in Australia’s major cities rose 1.4 per cent in October, to be up almost 21 per cent from a year earlier, according to CoreLogic Inc. data released Monday. House prices are outpacing wages by a “ratio of about 12:1,” it said.
Tim Lawless, research director at CoreLogic said, “This is one of the reasons why first home buyers are becoming a progressively smaller component of housing demand.” Please do read the full article with more details here: Article in nst.com.my
Reminder, salary increment should be higher than property price increase.
If salary is way behind property price, it meant that only the current owners will be happy while all the first-time home buyers are struggling to enter the hot property market or they are overstretched financially to enter the property market. This is not a good sign because this will become a bubble awaiting to burst when circumstances suddenly change. Do refer to the actual numbers stated in the article to understand why I say so.
Meanwhile when property prices reached a level no one could buy, then transactions will stop happening because no one could afford to buy in such a crazily hot property market. Of course, there’s also that factor of HOUSEHOLD income. So, prices may rise to unreasonable level for a single income professional but it could still be sustainable because of household income; two persons. Just remember, this is clearly risky already because what if one of these two working professional lost their job? Happy knowing.
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