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Property prices falling: excess supply and cooling measures

This was reported by a UK-based newspaper, Financial Times (FT) about the property prices here in Kuala Lumpur. It said that the reason for average sales dropping by 4 percent since last July is because of two reasons; excess supply and domestic cooling measures. Judy Ong of Knight Frank in Kuala Lumpur said, “The inflation had more to do with high levels of buyingfrom local investors — property has long been a favoured investment asset for Malaysians — than the success of the MM2H scheme.” Earlier article about MM2H here. 

Ong also said that in Malaysia, people look at property as a good hedge against inflation and many prefers it over shares which are more volatile. The paper also shared that property prices in Kuala Lumpur has risen by 128 percent between January 2009 and July 2018 but prices have been on a decline after the change of government from Barisan Nasional to Pakatan Harapan in the May general election. Property consultancy Savills also said that the MM2H scheme has been popular with retirees. For the full article Article in Malaymail.com here.

Briefly, when there are many units but there are fewer buyers, some sellers may choose to offload their property faster and thus will be more willing to reduce their prices. The property market transactions peaked in 2012 / 2013 which meant that most of those purchases have been completing since 2017 / 2018 and this huge supply of completed units into a slowing market meant the power of negotiation is with the buyers. This is one reason why average prices would have been falling. As for the cooling measures, the name has said it all, it’s cooling measure and NOT price falling measure yeah. Let’s remember that if we bought a property for RM500,000 our government is NOT going to force the prices to go down to RM400,000. Happy investing. 

written on 14 Dec 2018

Next suggested article:  Only when we could afford that property prices will go up

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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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