KL luxury property prices going up due to foreign buyers?

KL luxury property prices going up due to foreign buyers?

I like to ask everyone, when someone says luxury property, what’s the price point which we are talking about? RM800,000? RM900,000? RM1 million? Erm… I think these days, RM1 million property may just be sub-luxury. A typical double-storey terrace home in a properly planned township would already be close to RM1 million if not higher. The location is not even within any mature neighborhood. Else, it will be even higher than RM1 million.

Mortgage for a RM1 million property is as below and we can see that the monthly mortgage is RM4,427.46 and this amount is still affordable for a household where the combined income is RM12,000 or higher. I assume the household will spend a maximum 40 percent on home, 30 percent for two typical Japanese Segment B cars and remaining 30 percent on all other expenses.

So, my personal definition for luxury these days would be RM1.5 million or higher. Just my own definition yeah. Below is a report on how foreign buyers are pushing up KL luxury property prices.

Article in thesun.my. Prices of high-end properties in Kuala Lumpur are expected to surge upward, no thanks to foreign buyers who are scooping up luxury homes, said Universiti Teknologi Malaysia property economics and finance associate professor Dr Muhammad Najib Razali.

“As a consequence of this, Malaysians in the middle and upper-middle-income brackets will find it increasingly difficult to afford properties in major cities where prices are already high.”

He said another danger is that as foreigners have greater purchasing power and prefer luxury residences, developers might focus more on catering to their demands instead of those of the general population.

“This could reduce the availability of affordable housing for Malaysians and limit their options in the market. Some locations or property types might become largely owned by foreigners as well. If this happens, it would cause an imbalance in the housing market.” Please read the article in full here: Article in thesun.my.

Yes, I do think inflation is making things inflated but the value is lower

Just over 15 years ago, I would never have imagined a price of RM500,000 or higher for a condo of over 1,000 sq ft, much less for a landed property. Suddenly everything changed between the years of 2008 – 2013 here in Malaysia and suddenly RM500,000 condos become common while landed properties in established neighborhoods exceeded 7 figures.

For the past few years, property prices seem to have stagnated (hopefully can stagnate for a while more so that salary can catch up) and thus people have the perception that perhaps property prices could even be falling. Take a look at the below chart. We can see the property price on average decreased in 1998 and it is just slightly above 0 percent for years of 2001, 2009, 2020 and even recently. In other words, the increase looks negligible in percentage yeah. Probably something like 1 percent.

What’s a 1 percent in the context of luxury properties then?

RM1 million property with an increase of just 1 percent for 5 years would become RM1.051 million or an increase of just RM51,000. If this is compared to typical salary increase. Let’s say this person is earning RM10,000 and receiving 5 percent increment, her total monthly salary after 5 years would be RM12,763. This is an extra RM33,156 per year. So, a 1 percent increase in property of RM1 million is higher than a 5 percent increase in someone with a RM10,000 salary. Clear now? This is why they say buy a property and wait and not wait to buy a property unless our salary increase is much higher than typical Malaysians.

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