Every few days someone would ask me if the property prices would fall further. When I asked them back about their views about the worst that could happen, not even one said the property market will crash. I also do not believe it will crash and I seriously believe that with a more sane buyer and seller market, the property prices should stay stagnant or move downwards. The reason is because the rental for the luxury units even those nearby KLCC has started softening. This is especially for the oder units which suddenly faced lots of newer condo units. Read here: Luxury condominiums oversupply in Kuala Lumpur
With a softer rental market, of course the sellers would have to also loosen their grip on asking prices too. For the potential sellers, read here: Ready, Steady, Grab the opportunity (KLCC area)
Reported in TheStar, the total property market transaction value has fallen by 8 percent to RM149.9 billion in 2015. This followed the decline in transaction volume of 5.7 percent to 362,105 units in 2015. The fall in number of units transacted has been ongoing for many quarters but MIDF Research said that the fall in value is first in the past six years. In Q4 of 2015, the House Price Index (HPI) grew 5.8% year-on-year to 227.5, significantly lower than the 5-year average growth of 9.6%. To be exact, this is over 34 percent drop even if it is still showing an increase. Among the more major states, Johor grew by 5.6 percent, Penang by 5.8 percent, KL by 6.4 percent and Selangor at 6.2 percent.
Based on the latest Bank Negara statistics, the numbers for “Applied Loan for Purchase of Property” fell 4% year-on-year in February 2016 to RM17.83bil. Do note that household debt versus GDP remains elevated. Read here: Households Malaysia: Financial assets up RM97.6 billion versus RM70.4 billion up in debt
On a monthly basis, the data was 18% lower due to seasonally lesser property loan in February. However, MIDF said that consumer’s appetite on big ticket items such as property remains low due to high household debt coupled with elevated cost of living. I think it’s more sentiment than anything else because the demand should be strong if the confidence in the market starts recovering. Do note that with urbanisation, more people would need homes, whether they actually own them or rent them. My focus remain secondary market within Greater Kuala Lumpur currently. It may not provide the best returns but I think it’s pretty safe and solid where potential is concerned. We shall see. Happy buying.
written on 11 Apr 2016
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