My property price could be higher but the value of money is lower. Noted. So?

My property price could be higher but the value of money is lower. Noted. So?

Inflation will ‘kill’ any gains due to property price increase

Yes, inflation should be a worry for all of us. It does not stop even in the BEST governed countries of the world. In the property investment world, many people are saying that a fully paid RM500,000 priced property bought today will actually give the owner a lot less in actual purchasing power from the property, even if the price at the end of 30 years have risen to RM1,000,000. Plus the fact that many personal finance experts (who owns no property) are also saying the same.

Why inflation will kill the property price gains?

Assuming an inflation of 3 percent (as per what government statistics say), that simply means that by the time we finish paying for the property say 30 years later, our purchasing power from selling the RM1,000,000 property may just be equivalent to RM500,000 or even lower. 30 years later, maybe a typical bowl of noodle in the food court could be RM40? When all the expenses increase, of course the money we have even if more money does not translate to more purchasing power.

Property price (only for condos) are no longer increasing This is also true! (for now)

Some people are saying today that the property prices of condominiums in the Klang Valley have stagnated. There are too many of them! Actually it’s more like there’s more people who are unwilling or unable to buy a unit instead. In other words, the demand has changes tremendously. Instead of buying, they resort to renting. Instead of renting the whole unit, they rent one of the rooms instead. As there are many units trying to get tenants, they will reduce the rental rate too.

When potential property buyers see rental is reducing, of course they will be tempted to rent versus buying. With weak rental rates, of course property prices will stay almost the same. Prices usually rise when people see rents are moving up; higher potential ROI. Question is whether this will last forever? Question is whether this is true for every condo, every neighborhood… The answers to both is NO.

My low rental will be here forever, I just need to switch to other cheaper condos if the owner dares to increase my rental

For anyone thinking this is the truth, hopefully you google a little more to understand what is happening all around the world. Why people are so sad when their landlord increased their rental and they could not afford it. Why governments are implementing laws to protect the tenants from being unfairly evicted. Do you not wonder why the tenants have to be protected if indeed they have a greater power than the landlord? You may have heard of laws which limit the potential increase a landlord can do but have you heard of laws where the rental must have a minimum…?

Laws are not needed to protect the landlords yeah. They are usually to protect the tenants from being taken advantage by the landlords just because they have more people wanting to rent their unit and wanting to force existing tenant out. Please understand why in a relationship between the home owner and the tenant, the power is ultimately with the one owning the place. That’s why they are also called the landlord.

If we have a good landlord, appreciate them but make plans because things continue changing

Do we save for a potential property downpayment in the future? Do we know what other places are available if our landlord suddenly need the home back or suddenly wanting to increase the rental indiscriminately? Do we ensure we have the financial ability and also the knowledge about opportunity just in case things change? My tenant saved for 6 years, renting my apartment despite earning good money. He drove a Proton Iswara which I know is just to save more money. He moved out after 6 years and told me he has bought a landed property in Batu Maung, Penang. I am super happy for him too. Not sure if he’s still driving his Iswara today. Picture below shows a Proton Iswara.

Keep earning higher and more choices will appear

Billionaires surely do not need to own any property. It is way more comfortable to stay in the Presidential Suite of a hotel instead. Everything is taken care of. Multi-millionaires (Min 5 million and above) technically also can afford to just rent, rent and rent all the way because they have enough money and does not need to buy a property to stop renting 30 years later. In fact, RM5 million left in the Fixed Deposit at 3 percent return per year is equal to RM12,500 interest gain every month. Can live lah without the need to touch the principal RM5 million.

For the rest of everyone who’s not in the top 1 percent of the T20 or already have RM5 million or more, I think just focus on getting one property is a better option. Since some may hate property investment, then no need many, just one would do. This one property will ensure rental stops after 30 years. If necessary, can even sell that one unit and then use the proceeds to do whatever one likes including renting until the day we say bye bye.

Happy understanding and taking the right actions.

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