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Salary increment needs to be higher than property price increase. Don’t disturb this balance.

Please take a look at the image below. Latest one from edgeprop.my newsletter. Information is from NAPIC and Malaysian Employers Federation. What it tells us is something very important if we intend to have a sustainable property market moving forward. The reason why people say the property market is not sustainable was because prices were running far ahead of our salary increments. Okay, with the current market condition, the salary has finally managed to leap ahead.

If you could see, the salary increase has always been around 5% since 2011 till 2019. The home prices meanwhile has always been above it. Look at the house price growth very closely. It is STILL in the positive territory yeah. Just that the increase is now probably 1% or may even be lower but still above zero. Latest available Malaysia House Price Index (MHPI) from housingwatch.my as below: (as at Q1 2019.)

Please notice the average house price growth between the years of 1990 – 2017 was 6.4%. To anyone who believes that this average will be back, I personally hope NOT. Remember those years when the GDP growth for Malaysia was closer to 10% and the recent years has shown that even 6% would be a great achievement? Yes, we are much close to the developed status and it’s tough to keep growing like last time.

With a much lower GDP growth from now onwards compared to the 80s or the 90s for example, the property price growth will have to also slow down. Else, the market will soon be too dangerous for first-time home buyers. Thus when we enter the property market today, please be savvy to this fact and stop thinking that everything will just follow whatever happened previously. Maybe it’s better to wish that property price growth will always be slightly below the salary increments moving forward? Happy anticipating.

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Next suggested article:  Co-Living. Popularity soaring? Salary, Jobs and Supply factors.

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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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