7 reasons to drop that thought of waiting for property price to drop

Are you waiting for property price to drop?

I know, many say property prices have fallen or are still falling. One viral news many months back even said that the property prices will fall by a number which is really unbelievable. It did not happen yeah. Oh perhaps not yet happen? However, for anyone who does not have any property yet and is still waiting for the price to drop to a level which is considered “cheap” then do read on yeah. It may be best to drop that idea that property prices will drop, a lot. 7 reasons as below.

Photo by Maria Orlova on
Pexels.com

#1 – Salaries will be rising (maybe not in 2020).
I know, someone wanted to say that the fresh graduates are having almost the same pay today compared to 10 years ago. Well, today, there are by FAR more Malaysians earning salaries of over RM5,000 compared to 10 years ago. Today, there are also by FAR more Malaysians earning over RM10,000 per month than 10 years ago. Keep learning and move upwards. This is why these people earning higher could afford to pay higher.

#2 – Costs will still be rising (even if inflation looks like it’s close to zero).
 I am not sure about you but I remember long time ago, cement was cheaper than today by many times. These days, there is always the threat of cement price increase. Land prices was also a few ringgit per sq ft long time ago. Today, even in Rawang, the land price may be RM40 per sq ft.  If it’s a small plot and it’s nearby KLCC, it’s safe to assume that the price per sq ft may be in the thousands.

#3 – New catalysts will continue to come.

Let’s remember those times when there were NO Petronas Twin Towers and KLCC area. Prices were cheaper… Let’s remember those times when there were no MidValley Megamall. Remember those days when The Curve and IKEA was not yet in Damansara? How about areas with popular LRT stations today and future MRT stations? All these continue to push attractiveness of a certain area and when demand increases faster than supply, prices move up.

#4 – Urbanisation and the fact that median age at 29.
 In case we wonder why prices in major cities rise faster than small towns, that’s because of career opportunities. When more people graduate (over 350,000 tertiary graduates per year), they will move to the major cities such as KL, Penang, JB and KK to work. Demand for properties will grow. Assuming one landed home could be rented out at RM500 per room and there are 4 rooms, that’s RM2,000. The property price which used to be just RM200,000 will now double to RM400,000 because new buyers use rental yield as a benchmark.

#5 – Preferences continue to change.
Somehow people think a high-rise without facility is a no-no.  Somehow people looking for landed wants proper gated & guarded homes. Somehow if they could afford, they also want a clubhouse or for high-rise, they want two car parking slots or more. Beyond a small swimming pool, they want a very well equipped gym and a landscaped park too. All these meant that the cost per unit will rise and this will push up prices too.

#
6 – Malaysia is a follower for property market. ( I am happy for this particular point)
th  Frankly, if the property prices in advanced property markets had stayed stagnant without any movement, our (Malaysia) property market prices would have stayed the same too. However, when the whole world moves, it’s hard for Malaysia not to move. Every time people talk about affordability and they look at Australia, Hong Kong and even Singapore, we are actually nowhere near them yet.

#7 – Owners hate selling at lower prices.
 I have asked listeners of my talks this question many times. ‘Would you sell the property you bought at a lower or a higher price?’ The answer is 100% YES for Higher price thus far. Let’s remember that prices move up or down when there are transactions. If owners are selling higher and developers of the same township are also selling slightly higher every time they launch new projects within the same townships, then prices move higher. I have not heard of any developer selling ever lower every time they launch something new. If you know, please tell me!

There are many other reasons but I think 7 is more than enough to tell everyone that property prices will only be dropping when there’s a financial crisis. Well, there was the 1998 financial crisis and the 2008 sub-prime crisis. During the 1998 financial crisis, home prices dropped by double digits!  Nope, the double digit did not start with 2. It started with 1.

Today, prices have already recovered and moved higher than 1998 or 2008. If a financial crisis do happen again for example, the prices may again drop but the question we should ask ourselves would be, ‘Would we recover?” If the answer is a YES, buying is still safe. If the answer is NO, I have no answer for you. Invest into something else yeah.  Happy believing.

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Property price must not keep rising as if the sky’s the limit. 10% per year is considered high by the way.

Property price must not keep rising as if the sky’s the limit.

Not many gets double digits salary increment per year

Salary does not increase by double digits, except if one were to resign and got a better offer or if the one got a promotion in title and it comes with a bigger responsibility and bigger pay package. Else, it’s the usual few percent per year just so that everyone is not worse off versus the year before due to inflation. If we get the same pay next year and the cost of meals go up next year, then we will be worse off versus the year before. Sad story yeah.

Property price increase versus salary increments?

Thus, if the property price rises by DOUBLE digits and it continues to rise even though it’s already many times higher than the salary increments, it’s time that the authorities do something concrete about it. By the way, if property prices are to high, it will be make it ever harder for the first-time home buyers to afford a home and what about the first-time home buyers only next year and beyond?

Yes, the government are expected to do something drastic if prices are rising too fast. In fact, sometimes banks may have to step in too. Here’s one such case.
Read here: Banks can also help to stop property price from increasing too fast

Article in nst.com.my
  Australian home prices rose again in September 2021. it’s at a slower pace and this may be signaling that the red-hot property market is losing steam. Residential property values climbed 1.5% in September.
Market is up 20.3% versus a year ago.
This is also the fastest rise since June 1989.

Tim Lawless, research director at CoreLogic said, “With housing values rising substantially faster than household incomes, raising a deposit has become more challenging for most cohorts of the market, especially first home buyers.” Do read the full article with even more facts here:
Article in nst.com.my

Not just first-time home buyers by the way

Potential upgraders may now have to stay in their current home for a longer time to save more money. In fact, the ones renting may face financial pressure because when house prices go up, rental will be the next to rise even if it’s not immediately following any price increase. Home owners pay more for their homes, of course they would expect a higher rental to cover the monthly mortgage which they are paying.

Property bubble builds up when prices are rising away from the fundamental; affordability

When property prices rise too fast, there will be some buyers who will have to overstretch themselves financially to buy that property. If some unforeseen circumstances happen, all these people who have overstretched themselves will not have much to fall back on. They may not be able to keep up with the payments and that’s when these houses would have to drop prices a lot to sell quickly.

I wish all the current buyers over there in Australia are still not overstretched even if the prices rose very quickly. Then at least, the risks to property bubble is still low while the authorities take some actions to stop the red-hot condition from continuing for too long. I think this kind of increase is far away from property news Malaysia. Just need to continue doing due-diligence before we buy any property.  Happy viewing and buying.

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Property prices – 10% up for 2014?

Another prediction of property price increase in 2014. This is the Property Outlook Conference (POC) 2014. According to Andaman Group managing director Datuk Seri Vincent Tiew, rising costs will push up the total net cost for a developer by 5% to 8% and thus property prices could go up by about 5% to 10%. The chief reasons being labour, utilities, raw materials and toll charges. He said that these direct and indirect costs would have to be passed to buyers because developers may not want to absorb the costs. In terms of property buying sentiment slowdown, it is more likely due to the stringent lending requirements instead of the RPGT.

Renesial Leong meanwhile said that rising prices are not just in Malaysia but it is a global phenomenon. Nonetheless, Renesial said property investment is still the best hedge against inflation. Leong said there are areas that have been experiencing an oversupply of office space, but there is still strong demand in other areas. I have read her book before, she has a lot of good points on buying for rental.

I think the message from all these prominent speakers are that prices will continue to rise. We do not need to attend any seminars to tell you that prices has never stopped rising from the days that our parents bought their first property. My parents bought their first property in Teluk Intan, a semi-detached house which is considered huge if it is in Penang today and they paid RM55,000 for it. It has not risen by a lot, maybe just RM200,000 today? However, if we do a simple calculation, it has risen about 363%. Divided by 30 years meant 12% increase per year. No matter how much maintenance, other associated costs etc are added into the numbers, there is nothing that will give you more than 10% return year after year for 30 years, safely.

The worry all of us should have is whether the price increase is sustainable because if prices increased too fast, it will impact the debt level that everyone has and this is very dangerous when economic downturn happens. Many would default and banks maybe shaky. This will in turn affect everything else. Always remember, if certain prices are already too high and everyone you know are putting everything they have into property investment, be sober and it may be time to just step back a little and rethink. Remember the saying, ‘A fool and his money soon parted’.

written on 3rd jan 2014

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Property prices affected due to LRT 3 cancellations? (6 stations)

Did the news of the cancellations of LRT 3 stations affected you? Perhaps worried if the property prices would drop due to this new development? Anyway, the cost was one main issue why some of these stations were axed. These are the six stations which will not be constructed. Anyway, with regards to the worry of falling property prices, according to some experts, the cancellations will not affect the property prices.  Here’s that full article in
edgeprop.my: Here’s why prices of properties near the shelved LRT 3 stations won’t tumble.

Image Source: Edgeprop.my

Comments by
Nawawi Tie Leung managing director Eddy Wong. He said that he believed that the government has done a cost-and-benefit analysis, which showed that removing these stations will not have a huge impact as these areas may not have a lot of commuters. He added,
“I would say that the scrapping out of the six LRT stations will have an impact, but what we need to look at is the magnitude of the impact. The stations are not built yet [so it is not physically there], it is not like the stations were built and then now taken out.”

According to the Malaysian Institute of Estate Agents (MIEA) president-elect Lim Boon Ping also agrees that it will not cause a tumble in property prices but perhaps just some disappointment to the local communities who were expecting a station near their homes. He added, “It won’t have a big impact as it’s not something which is already built and being removed. Furthermore, people who want to use the LRT will still have other options, such as going to another station or choosing the park and ride.”

Metro Homes Sdn Bhd director See Kok Loong said that the impact will be for projects catering to the rental market. He added, “[For the properties that were banking on the stations], it means they have lost a unique selling point and thus their prices might adjust accordingly in the secondary market.”

As for the impact on housing price, Wong from Nawawi Tie Leung said, “Usually, a 700m to 800m is the average distance one will be willing to walk to reach the station, so properties around here will be impacted more in terms of price. However, what these properties really lose are their potential gains – which range from about 5% to 10% – from their proximity to the stations. “So, what we will see is just that there will not be a capital appreciation of 5% to 10% for the properties surrounding these stations.”

Rahim & Co International Sdn Bhd (Petaling Jaya) director Choy Yue Kwong says that the key to the LRT3’s popularity is the last-mile connection. “If the shuttle bus system could be improved and well-coordinated to shorten the waiting time, people will be more willing to take public transport than drive.” He added, “Although six stations have been shelved, as long as the provision or flexibility for future extension is still there, I believed it will not have a significant impact to the existing developments along LRT3.”
Here’s the full article in edgeprop.my for reference.

Personally, I think it’s more important to realise that property prices will change only when there’s actual transactions. Do we believe those owners who own properties nearby these cancelled stations would now immediately drop their prices by 10 percent simply because those stations are no longer going to be built? If the answer is YES, then the owners must be desperate sellers. If that’s the case, the LRT station cancellations was not the main reason for the drop in price. If the answer is NO, there you have it, the property prices will not be changing much in the near future. In fact, when we put in the inflation equation plus the salary increments, the property prices will definitely be inching upwards. The only unknown might be the actual percent that the prices will increase. Happy believing and please do not make LRT 3 stations as your ONLY reason to buy such a property and paying a high premium for it yeah. Property investment is for the long term and well, 2024 is at least 6 years away.

written on 15 July 2018

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Property prices and developer’s profit margin

I read in facebook that even with all the new levies to cool down Penang property prices it will not do much because the major reason why the price went up is due to the costs. land costs, material costs, labour costs and also all the state requirements of Rm120,000 in lieu of low cost units etc. Some are however saying that the developers should not profit too much and should sell their properties at a lower price. Actually, we do not need to argue. Let’s look at the actual numbers as some of these bigger developers are also listed entities and their Annual Report is available for the public to see. We look at three which has exposure to the Penang property market; SP SETIA, IJM and MAH SING.

SP SETIA is listed in Bursa and its 2012 Annual Report showed a revenue of RM2.5 Billion versus its gross profit of RM567 million. This gives a gross profit margin of around 22%. This is already 20% better profit than 2011!  It simply means the margin for 2011 was even lower.

IJM Land for its 2013 Annual Report stated a revenue of RM1.25 Billion versus its gross profit of RM320 million. This gives it a gross profit margin of around 25.6%. This is also 10% better than 2012.

Mah Sing’s revenue for year 2012 is Rm1.775 Billion. It’s gross profit was RM315 million. This gives it a gross profit of just close to 18%.

Surprised that the margin is not that high? Actually, if you are a developer, after adding all the usual costs and you are paying around RM350psf in building costs would you build if you have a gross margin of just 18-22%? Bearing in mind, there might be delays which you cannot control. Sales might also be slow and you are able to sell just 70% of all your units which meant that you are suffering losses if your margin is just 22%! Do not be surprised. These are the typical margins for the developers unless they cut a lot of corners in their construction. This is because the land cost, material cost and the price that the developers can sell are also dependent on whether the market can pay for it. Thus, no developers would price it so high that they may not be able to sell majority of their units.

Do not speculate. Buy what you need and what you can afford and property investment is a good investment. Be greedy once, you may be lucky. Greedy all the time meant that your luck might just run out one day. 🙂

Added on 15 Dec.  A reader said if crisis happens,  prices would come down.  I agree.

written on 14th dec 2013

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Property prices are too high in Penang

A friendly reminder. There are potential for a price fall for high end condos. For example, those which are over RM1 million and above. Demand may not be enough to support the oversupply. However, for those who are waiting for the RM500,000 condos to fall back to their original level of RM300,000, I personally feel the chances for this happening is close to zero. Nothing is impossible but your wait may be futile if you intend to wait for this to happen.

Statistically speaking, a recently graduated engineer in Singapore earns SG$2,600, typically. In Malaysia, if you are in Penang and entering a multinational company, you earn around RM2,600. In Singapore, referring to Singapore’s dominant property site,
http://www.propertyguru.com.sg
, the cheapest HDB flat advertised is around SG$300,000.  Besides HDB flats, there are little other choice. Actually, if you are just a fresh graduate you also wont qualify to even put in your name for the balloting for new HDB flats.

In Penang, based on
http://www.propertyguru.com.my
, a typical apartment of 700sf is RM250K or lesser and there are plenty of choices everywhere on the island. Why are people still shouting that prices are way too high and that it’s not affordable? Wait a minute, Malaysian graduates only want to stay in condominiums and not apartments or flats. Those are what they call as prices too high! I do not even want to mention the apartment or condo prices in Singapore.

My personal advice. Work hard, get married and then upgrade to condos. After working for 5 years, my wife and I managed to buy an apartment in Relau for RM123K. We bought what we could afford then. We stayed there happily for 5 years before upgrading to a condo in Sungai Ara. Tell me, any reason why graduates nowadays MUST stay in the ‘prices too high condominium’ in Penang? Property prices cannot yet be considered too high in Penang. Not yet anyway.

Edited on 13 June 2014

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Property prices around the world. Let’s look at latest news from 4 places?

Property prices around the world?

I have presented many times that I like the Malaysian property market because we are considered a laggard. The reason is simple. By looking at all the happenings at the advanced property markets and understanding what’s happening over there will give us an indication of what may happen here. Of course, not everything which happened there would happen here but please do remember that if the world did NOT become obsessed with property investment, then Malaysia’s property market would have remained almost the same the last 20 years. Anyway, let’s just look at some latest news today from 4 different countries, all are considered advanced property markets if compared to Malaysia.

#1 is my favourite place when it comes to getting a degree. United Kingdom.
 (Yes, I am biased, haha).
UK: Article in theguardian.com – UK property sales at 16-year high as house prices soar
  Buyers and sellers in March were in rush to complete deals before end of stamp duty holiday. Nicky Stevenson, the managing director at the national estate agent group Fine & Country, said: “The property market remains in a parallel universe at odds with the wider reality everyone has been living. It’s been a gloom-defying 12 months, given that last March, when the first lockdown arrived, the market seized up, mortgage products were withdrawn and everyone held their breath.”
Please read full article here:  UK: Article in theguardian.com – UK property sales at 16-year high as house prices soar

#2 is this largest economy in the world which wants to stay largest.

US: Article in bloomberg.com – Home Prices Surge Most Since 2006 With Tight Inventory
.
  U.S. home prices soared the most in 15 years, with low mortgage rates and a scant inventory of properties to buy fueling a tight housing market. Nationally, the S&P CoreLogic Case-Shiller index of property values climbed 12% in February from a year earlier, the biggest jump since 2006. That followed an 11.2% gain in January.
Please read full article in bloomberg.com – US: Article in bloomberg.com – Home Prices Surge Most Since 2006 With Tight Inventory
.

#3 is the country a lot of Malaysians love to visit and send their children for a degree.
Melbourne, Australia.  Article in afr.com – Melbourne’s median house price passes $1m for first time
Melbourne’s median home price cracked the $1 million mark for the first time after a 9 per cent surge in value through the March quarter, Real Estate Institute of Victoria data has revealed. The post-lockdown spike was the biggest price increase in metropolitan Melbourne since late 2009, following the global financial crisis, and brought the median house price in the city to $1,004,500. Please do read the full article here:
Melbourne, Australia. Article in afr.com – Melbourne’s median house price passes $1m for first time

#4 is the country right next to us. I prefer to look at them as a partner and not a competitor.

Article in channelnewsasia.com – Private home prices beat flash estimates to rise 3.3% in Q1, boosted by landed properties
  SINGAPORE: Private home prices in Singapore rose 3.3 per cent in the first quarter of the year, topping flash estimates released earlier in the month, on the back of strong demand and costlier transactions, analysts said. The private residential property price index increased to 162.2 points in the first quarter of 2021, up from 157 points in the last quarter of 2020, according to real estate statistics released by the Urban Redevelopment Authority (URA) on Friday (Apr 23). Please do read the full article here:
Article in channelnewsasia.com – Private home prices beat flash estimates to rise 3.3% in Q1, boosted by landed properties

Today’s performance is not tomorrow’s guarantee

What we must know is that just because the property market seems hot and prices seem to be moving upwards, there’s no guarantee that the same situation will continue to prevail. Let’s remember that in 1998, home prices dropped by double digits within 1 year. We also have to be savvy to the fact that if we look long enough, the the trend for property prices thus far has been to go up. Slowly or Faster in some countries does not matter, the trend is upwards. As for future, I have no predictions. I just know that my property investment journey will continue.

Happy joining me. Else, remember to invest your money somewhere instead of spending it all away.

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Property prices? Congestions would push it lower? Fat chance

Perhaps more applicable for the Klang Valley but actually I faced it even when I was still staying in Penang. We are about to arrive home. Perhaps just 1km away. A hot shower awaits after 10 hours in the office. Then, we realised that the traffic was at a standstill. We wonder why and by the time we arrive at the spot for reason why, it was because of one row of cars who believed that the road was theirs or their grandfather’s.  Or perhaps they deserve to park wherever they love to park since they were also staying there. In short, they have somehow changed the two-lane road into a single lane. Are they worried? Well, not really because they are in numbers. ‘One whole lane’ of them. If you have faced this situation before, you are not alone. Unlike in China where they move the illegally
parked car to the roof, haha, (read here),
 it does not usually happen like that here in Malaysia. We can call the traffic police / town council officers to give summons but somehow, unless they come everyday, the problem is likely to persist.

From my friend mr. google, the fine / summon ranges from RM30 – RM100. Sigh… It’s either all of us grow much more civic-minded or the fine is made much more significant than today. Given a choice, which one would you choose? Perhaps moving out of the neighbourhood then? Haha. Based on all my interactions so far, Malaysians have a very high sense of tolerance. They will STILL stay in the same neighbourhood, even if the congestion happens daily. Think of some very mature neighbourhoods and you get my idea. 🙂  So, to those friends who believe that congestions or jams would drive property prices lower, it does not happen.
Here’s one piece of news in NST
and I seriously do not think the property prices will start to drop next month, even if this happens again frequently.

Seriously, it’s time the local council becomes very serious with all these violations. Increasing the fine is fine but perhaps start thinking about towing all these cars away within a short period of time? Increasing inconveniences would actually work better than an increase of RM50 per summon for example. Well, not unless it’s RM50 per day for the same car or a doubling of the fine every time the same gets it? Yes, perhaps someone would like to point out the fact that they have NO CHOICE? Sorry yeah, the last I checked, there are definitely a lot more affordable neighbourhoods which are today having accessibility to some MRT or LRT stations within 10 minutes away. I do not wish to debate on whether or not we are an advanced nation soon. I would however welcome an advanced action on making congestions a thing of the past. Hope my dream comes true for the sake of all Malaysians who face congestions in their neighbourhoods today.

written on 1 Sept 2017

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Property prices on the decline says PropertyGuru

Press Release by PropertyGuru.com.my  –
PropertyGuru: PropertyPrices On the Decline

PropertyGuru Market Index indicates quarterly price dropsfor three consecutive quarters in 2018

Prices have declined every month save forFebruary, June, and October 2017

KUALA LUMPUR, 26March 2018
 – The PropertyGuruMarket Index (“PMI”) which tracks the asking prices of homes in Malaysia shows a continued decline in the 4
th
quarter of 2017 (“Q4 2017”) as the market continues to correct itself – amidst a complex scenario of growing oversupply in certain property segments and prevailing consumer unaffordability.

For Q4 2018, the PMI indicated a decrease of 1.6 percent compared to the previous quarter (Q3 2017: 0.2 percent decrease). In a year-on-year comparison, prices have declined by 3.7 percent. Save for June, February and October, all other months in 2017 showed a decline in asking prices across all classes of residential properties.

The PMI is derived from PropertyGuru’s extensive proprietary data, which includes (but is not limited to) the asking prices of over 250,000 residential property listings on
PropertyGuru.com.my
.

According to PropertyGuru Malaysia Country Manager, Sheldon Fernandez, the declining trend is consistent with prevailing market sentiments and that the on-going price correction is healthy for the residential sector in the medium and long-term.

“The declining trend has been evident throughout 2016 and 2017 so it’s no surprise. Importantly, it has been gradual so there are no significant shocks to the market and both buyers and sellers can adjust themselves accordingly. Declining prices usually co-relate to improved consumer satisfaction. In fact, our last consumer sentiment survey showed consumer positivity towards the real estate sector has improved,” he shared.

According to PropertyGuru’s latest consumer sentiment survey – released in January this year, consumer satisfaction has improved to 38 percent with 57 percent of Malaysians intending to buy in the next six months – up from 52 percent.Fernandez also added that with unaffordability continuing to be a major issue, there is greater downward pressure on asking prices.

“While desire to transact remains strong, most property buyers – about 67 percent can only afford homes priced between RM300,000-RM500,000. In addition, PropertyGuru data shows that ¾ out of four Malaysians believe the market to be oversupplied. Hence, many buyers are opting to adopt a wait and see approach, especially with talk of general elections throughout 2017,” added Fernandez.

In tandem with the national price trend, all key property markets – Kuala Lumpur, Selangor, Johor and Penang have seen asking prices decline in Q4 2017.

In Kuala Lumpur, prices have dropped by 1.2 percent compared to the previous quarter (Q3 2017: 1.4 percent). Similarly Selangor, Johor and Penang saw quarterly price decreases of 2.1 percent, 0.5 percent and 0.2 percent respectively.

However, certain key locations across all four property epicentres have experienced price stability or sellers are still able to relatively maintain their price offerings. In the Klang Valley, these would be Sentul and Bangsar. Up north, BalikPulau and TanjungBungah in Penang have remained comparatively stable.

“Bangsar is a mature location with an established name, hence the ability of owners especially those who bought their properties many years ago to hold on to their prices,” explained Fernandez.

Down south, in Johor where prices have largely been on an uptrend, for Q4 2017, popular locations such as Nusajaya have seen prices decline slightly while emerging hotspot – GelangPatah shows upwards price movements.

“This is probably due to consumers searching for homes in alternative areas compared to the established areas of Nusajaya, Johor Bahru city and so on. However, given that Johor prices have been on a high for a while, on a y-o-y basis, prices still are holding,” added Fernandez.

The PMI is a comprehensive, insightful quarterly overview of home pricing trends at national level, as well as the key property markets of Kuala Lumpur, Selangor, Johor and Penang. The data is cleaned, aggregated and indexed to provide insights into price movements on a quarterly basis. The index also considers supply volume of properties from both the primary and resale markets.

The PMI is available to the public at:
http://www.propertyguru.com.my/marketindex
.

— end of press release —

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Property prices down 10 percent, approval in 12 months.

Some Kota Kinabalu centric news. Sabah Housing and Real Estate Developers Association (SHAREDA) has submitted a memorandum to Local Government and Housing Minister Datuk Hajiji Noor with a proposal which will see approval time for development plans to be reduced from current 30 months down to 12 months. According to its president Datuk Francis Goh, it also hopes to reduce the capital contribution charges to Sabah Electricity Sdn Bhd. If these can be done, the total cost for the developers would be reduced and thus it is possible that property prices can then be reduced between 5 and 10 percent. This is a good number because the property prices in Kota Kinabalu are no longer considered low. Read here:
Kota Kinabalu property market, shortages soon?

Only one small issue, this memorandum was to have been submitted together with expert bodies such as the Malaysian Architect Association (PAM), Sabah chapter of the Institution of Engineers Malaysia (IEM), Consulting Engineers Association (ACEM) and the Sabah Law Association. All these expert bodies have shown support for the plan but claimed that Shareda has submitted the memorandum by itself. Goh admitted this has happened but said that he would leave the final decision to the expert bodies. This is because the proposal has been long delayed as the draft proposal has been sent to all parties. He said he would like to hold a meeting on this soon.

Personally, I believe the inclusion of all relevant parties would have been the best. However, having been in the corporate world, I also understand that sometimes waiting may not be the best option. Every organisation would have their own timelines, requirements and it is not possible to force them to follow a certain deadline. It is not the fault of any party but it is also vital for the proposal to proceed. I think in this case, Shareda is proceeding but are still hoping that the expert bodies would join in as one of the stakeholders. My wife is from Sandakan and I own a high-rise unit in Kota Kinabalu. I will be watching this and update the progress which hopefully is a positive one. Happy discussing.

written on 6 Sept 2015

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Average of RM419,000 is indeed quite high, actually

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Property prices dropping…. No demand, more supply

I think all of us have read about the probability of property prices dropping further in 2016 after a lacklustre 2015. So, how many percent should it be dropping? If you ask me, my answer is, does it really matter what’s the percentage? The reason is because the grossly overpriced ones would have to drop more while those not overpriced ones may only drop slightly. So, which should you buy then? No right, no wrong, choose one you believe in and view, then offer an attractive enough price in your opinion. It’s a good time for potential buyers but by no means a desperate time for sellers. Read here:
Property market from my observations on potential buyers
 Sorry, I really do not see that coming unless the whole world suffers an even worse situation than today. China’s growth has dropped to the lowest since 2009 and that’s already an extremely bad news.

Reported in the local media on 20 Jan 2016. According to James Wong, the organising chairperson of the 9th Malaysian Property Summit, 2016 will be ‘challenging’ because of the economic slowdown and the higher cost of living. My earlier article:
Property market: Nothing much in 2016 as per Maybank Research
 He said, “If you look at primary market transaction, there’ll be less launches this year, take-up rate will be lower, the oversupply that is in the property market, the overhang, will build up if you talk to the banks more auction and foreclosures of properties this year.” He was however not expecting a property bubble but a moderate decline in the property market. He said something which is already happening today; developers staggering their launches in order to control the new properties entering the market. As usual, expect more freebies as developers step up their efforts to sell. He said that for 2016, it will be the secondary market that will be driving the market instead of new properties. My earlier article:
Sometimes, secondary property is a better choice

It’s good that his prediction is close to my personal analysis. Just this morning, a colleague asked me about buying a certain primary property. I told him that I personally like the developer that he was asking and that the new condo, at RM560 plus per sq ft is not really excessive BUT the secondary market has many choices below RM500 per sq ft. Look slightly further, older and less attractive meant even RM400 per sq ft or lower. Read here:
Staying further away is a fact of life, everywhere
 Anyway, there’s no such thing as a perfect choice. Buying a new property may mean one has less hassle when it’s completed. There’s also no guarantee that the prices of these secondary units would be increasing too.

Do note that when overall  transactions drop, it simply meant supply is much higher due to much lower demand. The major cause is however due to market sentiment influenced by everything people read and everyone they met. Primarily, it is not due to the 6% GST, the depreciating Ringgit (we are buying local property in local ringgit, what’s depreciation got to do with it?) or even unemployment or lower salary etc. When unemployment really rises up suddenly, the property market will not be slowing down, it will stagnate and prices will ‘jump’ down. Let’s hope this does not happen and that the market continues to just slow down while waiting for these negative mood to pass. My personal 2016 plans? Here:
2016 – Personal focus, plans and strategies

Happy viewing and offering.

written on 21 Jan 2016

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Slowing market and the auction potential

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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

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Only when we could afford that property prices will go up

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Property prices can ONLY go up when we can afford it.

Please read the title a few times and understand its significance to the property market. There has been predictions on when the property market will rise again. Some say that it will be in 2020 or 2021. As for now, it’s consolidation time. What is consolidation? Well,it simply meant transactions continue to happen but the prices are not moving up with every transaction. Of course, predictions will differ every year and if we remember, there was also a prediction that the property market would collapse early this year (2018). Fortunately, it did not happen. However, it is very important that we look at the very basic fundamental why property prices could even rise in the first place. It’s all about affordability. No, not about affordable homes. It’s about the ability to pay as determine by the monthly salary.

Remember the years (2009 – 2012, mostly) when property prices seem to be moving up every time there’s a new property launch? A RM230,000 condo in Penang nearly doubled in price when it was completed. My colleague who owned a unit sold her unit for RM400,000. She was extremely happy because the gross profit was RM170,000. Her investment was merely a 10 percent downpayment or RM23,000. Gross ROI is thus RM170,000 divided by RM23,000 and then divided 4 years (the day she booked till the day she got her keys). That’s 85 percent returns per year. Yes, quite unbelievable, right? By the way, the same property is now RM600,000 or higher, today. The question is, how could the price have risen so much? The answer? Someone must have been able to afford it, somehow. So, how much is the monthly mortgage payment when it was RM230,000? Please refer to the image from iProperty.com’s mortgage calculator. The repayment is only RM1,036 per month. The salary of that colleague? RM4,000. This is merely 26 percent of her pay. Yes, we have yet to include her husband’s pay.

What happened when the property price became RM400,000 then? The monthly mortgage is now RM1,802. Do refer to the iProperty.com mortgage calculator to see that all our other assumptions remain the same. At RM1,802, this is 45 percent of the colleague’s monthly pay. Assuming she does not own a very fancy car, the bank would still approve her home loan. Remember the construction took 4 years? Within these 4 years, she has enjoyed 4 years of salary increments. If we look at an average of 5 percent per year from her RM4,000 pay, by the end of 4 years, her monthly pay would have risen to RM4,862. Based on a mortgage of RM1,802 that’s only 37 percent of her monthly pay. This was the reason the new buyer was able to pay for the condo despite it rising so much; a staggering RM170,000 over a period of 4 years! What if she got promoted in one of those years? The increments would have been higher. If she had joined another company for a substantial pay increase, then the percentage (loan vs income) would have been even lower.

Calculate it! [mortgagecalculator] Can the same property increase another RM170,000 then? It did, actually. That same property is now RM600,000. Probably it was also because of demand vs supply but the fundamental will always be about affordability. When the property was priced at RM230,000 it was considered low. When it became RM400,000 it has become affordable. At RM600,000 today, it’s already unaffordable to the same person even if she continued to enjoy increments. What happens if the price now stays almost the same but the same person continues to enjoy a stable pay increase every year? The same person may be able to get her loan approved sooner or later, unless of course the property price rose faster than her pay. Stop anticipating when will the prices rise higher. Start looking at the median income numbers instead for a better idea. Enjoy your property investment adventure!

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written on 17 July 2018

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Property prices rising higher than income, true. Why can we still buy?

Everyone tells me that their income is rising slower than property prices. I have to agree and I have to inform you that this happens in all countries and in some countries, the condition has become worse.
Malaysia? Well, perhaps we are at ‘bad’ level now. Anyway,
 let’s start with a very simple illustration on affordability. Image shows the mortgage calculator from propertyguru.com.my A typical one. Assumption is made to show what happens when we earn a gross income of RM60,000 a year or around RM5,000 per month. Assuming we can have just RM2,000 for our mortgage per month. We can technically buy a RM440,000 home. As long as we have RM40,000 in downpayment while the bank lends us the remaining. It is stretched over a period of 30 years. If we are younger, we can stretch this longer, usually 35 years max. Yea, based on this calculation, this person, on his own can only aim at affordable apartments. Since he is alone, I guess a 800 sq ft home is already considered big for him. He can even rent out the other 2 rooms and he could stay in the smallest room. If he does this, then he will be able to save more, faster.

So, how much can his salary rise every year? Well, usually it’s 5 percent (that’s what most of my friends got. I am around there too.). So, it will be RM5,000 x 1.05 = RM5,250. An extra RM250 per month. Yea, I know, it’s not a lot. Nowhere near enough for iPHONE X.

What about the property price? RM440,000 x 2 percent increase? (conservative lah). That’s RM8,800. Oh no!!

Salary up by RM3,000 per year. The home price increased by RM8,800.

There’s no way I could afford a home, right? Okay… actually, when we borrow from the banks, the repayment period may be 30 years. In other words, if you were to borrow RM8,800 extra and stretch this over a period of 30 years,including interests, it will still be lower than RM40 per month. (4.25% interest). Note though that this is only for Year 1. By year 2, what if property price increases by another 2 percent? That’s about RM9,000. Stretched over 30 years, this is only an extra RM40+ per month. So, the property price has just gone up by RM18,000 but even with the same increment like your first year, you could still afford to buy. Now you see why even when property prices seem to be increasing in a larger amount than our salary increment, we could still afford to pay for it, up to a certain level lah.

On a longer term, it will get much
harder to save enough downpayment.

An increase of RM8,800 meant even with the same pay, we must squeeze an extra RM880 as savings for our first property. Since we have an increment of RM3,000 per year (5% increment), we need to save around 25% of our extra income just to match the increase in property price. In other words, if we chose NOT to buy a property as soon
as we have enough downpayment, the affordability is going to get tougher.
 This is what they meant by money getting smaller. Depreciation of ringgit is another matter. We earn RM and pay RM for property. Anyway, this is also the reason why property prices could increase even when salaries are not increasing as fast. As long as people could still afford, they will buy and usually this pushes the price up slowly. Will it increase to such a level that no one could afford? If it hits that level, then property bubble will burst and everyone who has money will be able to buy cheaper properties, for a while.

The above is an extremely simple calculation but I think you get the idea. This is why for some countries, the property prices are already at very dangerous levels. Many governments are applying the cooling measures. What they are doing is to ensure property prices move up slowly, if possible, slower than salary growth. Or,
they push for more affordable homes

because by doing this, people do not need to keep trying to buy more expensive homes and pushing the prices up since their typical increment meant that they could still afford to buy even when property prices increase. Happy understanding. If you have benefited, do sign up for 1 article a day from kopiandproperty.com

written on 14 Nov 2017

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Property prices in Malaysia. What’s up? Or is it down now.

Let’s look at this topic today, ‘Property Prices in Malaysia.’ Note: Every state, every city would have a different number yeah. This stats is for Malaysia as a whole.

Yesterday
 (no, not that song) as in long time ago.

When I first started to invest into property (I define investment into property as second property onwards). First property is just to ensure we do not need to pay the below rental amount even after we retire.

Rental per month: RM2,000     Number of months (in a year, haha): 12    Number of years: 25

Calculation: RM2,000 x 12 x 25 = RM600,000.  Yeah, this is the amount we need to be ready if we do not actually own any property which we could stay in. I know, we could decide to rent just a room instead when we retire, right? Tell me all my dear readers, after retirement, we still want to be cooped in a room and watch some shows on our notebook?  We could NOT even watch the TV in the living room because the owner is watching his favourite show or other tenants were watching some shows we do not like? REALLY SO SAD?

TODAY
 (as in now and the near future)

What has happened to the property prices of the properties I own

 Well, for the ones bought before 2013, if I do sell now, it would mean lower profits, nowhere near any potential losses. For the ones bought after, I better hold because the market is not that conducive for sellers.

So, the question for all owners would always be, ‘could we hold’ or ‘do we need to sell.’  If we look at the Malaysia House Price Index, it seems that there are more Malaysians who could hold versus those who have no choice but to sell cheap. Well, seems to be like that until Q3 2020.

In Q3 2020, the property price has dropped, finally. I say finally because the chart says so yeah. Take a look at how the property price had been trending.

Source: tradingeconomics.com

Tomorrow? (As in future, probably 5 years of more)

Ask ourselves very seriously. Are we ready to rent until they day we say good bye? Any decision would need an action. If Yes, we want to rent, just get ready the money. If No, we do not wish to keep paying rental, then it’s really saving… then buying and continue repaying for the next 30 years and STOP. Yea, if it’s the home loan, it usually has an end yeah. Rental is meanwhile forever… and ever.

Ask our partner very seriously the same question too. Own a home or rent a home or rent a room. Anyone answering rent a room / home, please do note that  many future father-in-laws would not like your thought.

Ask ourselves whether property price would continue to inch upwards. Whether it’s 1% or 2% or even 3%, if it’s 30 years, the property price would still at the very least, doubled. Consider that as forced savings since many could not save independently anyway. If we think property prices would keep going down, then get ready yeah. We will soon be spinning into a financial crisis. Never before in the world where the economy does extremely well and the property prices fell to extremely low levels. Please tell me if you know of any. Thank you!

Conclusion

Property wise, I have moved many times. I am only speaking about homes I own yeah. If you like to know reasons to move, read here.
Reasons to move homes
.
 I am not that attached to any particular property. It serves a purpose; to give me a home. Once I found another home I love, then the current one could become a home for someone else. Yes, I should be moving again next year. That’s 2021. As for those always sensitive to the topic of property prices in Malaysia, just note that for most years, it shows a positive number. Low or high is another matter but it’s a positive number. Cheers.

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Financial news: Property prices after taking out inflation. Which countries are up, which are actually down?

As usual, I found another very good set of charts from
 visualcapitalist.com (please click to go view the whole article yeah. Else, refer below for some of them plus explanations too)

Malaysia is not within the top 10 of rising property prices

Everytime I hear people say property is just too expensive, I am not sure how to say how pitiful some people in these countries where the property prices are rising much higher then inflation are feeling. Then again, it’s comparative because people would then say but the ringgit is down so much. When pointed out that ringgit has not moved much against most currencies and in fact is better than some advanced country currencies, they would tell me they don’t believe there’s such a thing. Whatever lah.

Keep thinking and taking action based on what you believe yeah. One example? People kept laughing at my decision only to buy high rise units and kept reminding me that landed is the one which will shoot up like a shooting star. Noted. Haha. Coming back to the actual states.

The REAL TOP 10 countries with increasing housing prices (2010 – 2022)

Nominal means it is just gross price increase without taking out the effects from inflation. Real price growth meant the property price rise AFTER deducting the inflation numbers from it. Yes, no need to tell me. It’s SUPER BIG increase. There’s also no need to wonder about the salary increment in these countries. There’s no way all of them receive more than double their salaries within 12 years yeah.

The REAL BOTTOM 10 countries with increasing housing prices (2010 – 2022)

Singapore and China are two countries where the government has taken very pro-active steps to reign down the speculation. Thus, the real price growth is really lower than even the inflation rate! If you ask me, I think it’s perfectly fine. If I have just 2% growth in price every year and this follows inflation, this is how much a RM500,000 property would become after 12 years.

RM500,000 property with 2% increase every year for 12 years = RM634,121.  In other words, increasing by an average of RM11,177 per year.  If I had paid 10% for this property and it increases by RM11,177 per year, then my gross return is RM11,177 divided by RM50,000 and that’s a return of 22.3%. This is continuous for 12 years yeah…  Hope you know why kopiandproperty.com has a lot of readers yeah. 😛

Where is Malaysia then for the property price increase?

Out of the 45 countries in the list, Malaysia is ranked 17th. If we do not take out the inflation, then the property price has risen by around 8.5% on average every year. Taking out inflation means an increase of around 4.9% every year on average. As usual, please remember that Return on Investment is based on how much we invested and NOT the house price yeah.

In other words, RM500,000 home and 10% downpayment means an investment of RM50,000

Meanwhile, the property price increased by 4.9% per year and that’s RM50,000 x 4.9% = RM24,500 per year.

Simple calculation of RM24,500 divided by RM50,000 means a return of 49%! Over 12 years on average.

Please take with a huge pinch of salt because all these are average numbers. There’s no such thing as everyone having a similar number. Perhaps some may even tell us about their losses!

Here is that link again:
visualcapitalist.com (please click to go view the whole article yeah. Else, refer below for some of them plus explanations too)

Happy deciding and if your property has risen by something similar to the average numbers above, congratulations!

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Yes, property prices may be lower without GST. Buying decisions to change?

Anyone here delayed signing their Sales & Purchase agreement after they heard about the GST becoming zero in less than 2 weeks’ time? Actually, GST does not affect only the property market. There are chatters that car prices may inch upwards when the Sales & Service Tax (SST) returns.
Here’s an article in paultan.org
  The reason is because the SST is likely to be in a higher percentage than the GST which is 6 percent and will become zero from1st June 2018. Anyway, many car brands have stepped up their promotions to entice buyers to make their decisions sooner rather than later. What are your thoughts for the property market then? My earlier thoughts here:
Will the market get better? Does it even matter?
The below would be the thoughts from the
Real Estate and Housing Developers’ Association (REHDA) president Datuk Seri FD Iskandar in Edgeprop.my

FD Iskandar commented, “Construction material prices and costs should go down. But we expect big-ticket shopping to be delayed until June, [when the new rate takes effect].” He also shared that some developers had already lowered their prices in response to the new GST rate and hopes more will follow suit. He added, “GST is about 2% to 4% of our cost… it is good that some have reduced prices. In the long run, the savings should be passed on to consumers. Hopefully, there will then be a higher number of people looking at properties.” He shared something which has to be improved; effective implementation and enforcement so that unscrupulous vendors could not profit from the move. As for permanently removing the GST, FD Iskandar said, “GST is an act of Parliament, so they will need to go through Parliament, if they wish to repeal it? Give a waiver? We shall see.”
This is the article in TheEdgeMarkets.com

If it’s just about the GST, actually the rebates that some developers are giving today is already higher than the 2-4 percent mentioned by FD Iskandar. We should already be savvy to this fact. In fact, some developers are giving renovation packages which are sometimes already higher than the 2-4 percent as mentioned earlier. However, if the developer is giving an additional 2-4 percent discount on top of what they are already offering, then perhaps that’s really an additional sweetener. Anyway, GST has never been directly involved in the residential property pricing. It’s only a direct tax on the commercial properties. That’s why FD Iskandar said that GST is 2-4 percent of the cost (which came from the material costs). GST is not the main reason to buy yeah. Evaluate as usual and buy if it meets our expectations. On a long term basis, that 2-4 percent or even 6 percent will not be significant. Happy investing.

written on 20 May 2018

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Why it’s not easy for property prices to fall?

My personal view as a property owner

If I am to sell my property, I will sell it at a price I prefer after taking into account the typical market price for the property. Anyone can always come to me and say, “Market is bad… Covid-19 is getting serious… better sell as prices will fall…” and I will tell them to go look for another owner instead. If another owner sells at a lower price, it also meant that there is one less competition in the market.

No one knows if the remaining owners would now comprise of all those who could hold on to their properties. Potential buyers would thus have to buy at a price which the seller wants to sell instead. Yes, I have a property in Penang which I wanted to sell but I prefer the price to be a minimum of RM600,000. No one has offered that price and thus, I am still waiting. I am very sure some owners could have sold lower. I will wait.

What if the seller has financial difficulties then?

If I have financial difficulties, then I do not need all these people to come tell me to sell my property at a lower price that what is typical. I would have already proceeded to sell the property at 10, 15 and even 20% below the typical property price. So, the question on whether prices will fall does not depend on what people say. It depends on the owner’s ability to hold. If the owner has no financial difficulties, they can hold for a very long time.

We have an article which basically is telling everyone that prices are unlikely to ease anytime soon.

Article in themalaysianreserve.com
   CCO & Associates (KL) Sdn Bhd ED Chan Wai Seen said it is the right time to buy properties for “own occupation” largely due to the affordable pricing and incentives offered by the developers. He said, “Notwithstanding this, buyers should be financially ready to pay the instalment now and be ready for the instalment amount to increase by up to 20%.” He added, “If not, it is not advisable to purchase properties right now.”  Read here for the full article:
Article in themalaysianreserve.com

What if property prices continue to fall then?

If property prices continue to fall, then fewer people would want to buy a property. Not many people is crazy enough to buy something that depreciates… right? Except for their dream car maybe. In fact, if property prices continue to fall, even property developers would have to find another business to venture into. Building homes which will take 3 years and at the end of 3 years, the property price their property could fetch is lower than the property price three years ago?

Banks would not want to lend money for property purchase. Especially if it is proven that property prices would continue to fall. Banks would now move all their lending to other purposes and will just skip any home loan applications by rejecting them. By the way, banks need to earn profits because they have their shareholders and also their huge number of employees too.

Yea, this is why it is not possible for property prices to continue falling. Maybe if an economic crisis strikes, then property prices may undergo one round of steep fall but as soon as the economy shows a recovery, property prices will rebound. Such is the case when it comes to property prices and this is also why so many people think of property investment as a very good form of investment. Happy understanding.

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Property prices do not change just because asking prices are falling…

A negotiator friend from Penang told me that some buyers do not trust property negotiators. After his sharing, I think it’s important to note a couple of things, whether it’s the negotiator, the asking prices and even the final transacted prices. When we want to sell our home and the real estate negotiator tells us that the property prices are on the way down, what is our reaction?

Response 1: ‘No, I don’t believe, please sell my unit at a higher price because xxxxxx, yyyyyyy, zzzzzzz.”

Okay, so we gave the negotiator a piece of our mind. Anyway, there are three possibilities. First, the real estate negotiator is honest. The seller’s asking price is really dropping across the board. So, should we follow those prices? Somewhere in the middle?   Second, the real estate negotiator is not honest. Property prices wanted by the sellers are actually on the way up BUT there are no buyers. Do we price our units high up there or in the middle somewhere?  Third, the negotiator just wanted to know what’s our bottom price so that it’s easier for them to help us sell. Remember, there’s no point trying to sell higher than everyone in the market because even the negotiator would not be able to sell, usually.

Of course, we could also check
brickz.my
 to understand what’s the actual transacted prices and make our decision to sell on the high side, low side or somewhere in the middle? Frankly, if we really need the money, then it has to be on the lower end. If we are only testing the market, then it’s usually in the middle. If we believe that our unit is the most special in the market, then by all means, put the price highest in the market. For example, we may be the only unit up for sale out of only 8 units which has unobstructed views of some spectacular view? If that’s the case, we have a case to price it higher. However, do note that whatever decision that we make, it has very little to do with whether the prices are trending upwards or downwards. In fact, as I have written earlier, when there are

NO transactions, the property prices do not change.

According to an earlier article here,
PropertyGuru Malaysia Country Manager, Sheldon Fernandez shared that asking prices from sellers for their homes are showing a declining trend.  He shared, “the declining trend is consistent with prevailing market sentiments and that the on-going price correction is healthy for the residential sector in the medium and long-term.”  Please note that his statement about on-going price correction is referring to just the asking prices and may not actually represent the actual property prices being transacted. Let’s remember that buyers do not jump into the property market just because of property prices dropping yeah.

It may not be the area they like!

Attaching a chart with the latest property price change last year. Anyway, when we manage to sell in a slow market, it also meant that we have the opportunity to use the proceeds to buy other potential properties too. Not selling it simply meant we have no such opportunity. No right or wrong, just a decision based on what we believe okay. Happy understanding yeah.

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written on 28 March 2018

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Property Prices, Prime Locations, Embassy Land Sale

Within the past two years, a few embassies have sold the land for which their building is on. The British High Commission sold theirs for RM294.97 million or RM2,200 per sq ft. Total land size was 1.22ha. (131,320 sf) It’s in Jalan Ampang. The German ambassador’s residence in Jalan Kia Peng is being valued at RM200 million or RM2,500 per sf. The latest one would be the French embassy which is bigger, at 3.23 ha (347,674sf). French Embassy’s deal would however be completed only later than October as it will be handled by its new ambassador who will only be arriving in Malaysia in October.

Personally I think this will continue because the rationale is simple. If you needed to go to the embassy, you will go to the embassy even if it is in Putrajaya. There is much to gain by the disposal of the land which has appreciated tremendously and no one knows if this value would continue to be so strong in the future especially with the continuous slow transactions for properties thus far. The embassies can gain a one off huge profits which can help to maintain their embassy better. Perhaps they can even expand their embassy size if it’s slightly further away. I think this will not be the last, which one is next? There are still the Spanish Embassy, the Royal Thai Embassy, Uzbekistan Embassy, Ecuador, Finland, Azerbaijan, Russian, Myanmar and many more in the smaller roads leading in from the main Embassy row.

In terms of new developments, these areas are considered very prime and many expats love to live there as it’s convenient to their working place. To be honest, none of these expats would be willing to drive through jams after jams everyday just to reach their office. Besides, irregardless of what we always think about ‘expensive’, the cost of maintaining them here nearby KLCC is definitely still considered ‘affordable’. As an example, the typical rental for an apartment in CBD area in Singapore for an expat starts from S$3,000 (RM7,800) for a 600sf apartment to S$5,000 (RM13,000) – S$8,000 (RM20,800) for a mid-range apartment. This goes up all the way to S$25,000 or higher for a 2,500sf off Orchard Road. Plus, there are also the super rich Malaysians too who may just want to own a unit there in case they got too drunk to drive after a long Happy Hour session.

written on 13 Aug 2014

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Property prices up 50%, how much is your profit? (Updated)

A friend of mine who is a sales manager in an online company told me that she earned 50% profit the other day as soon as her new property was completed. She had bought the property for 4 years. Actually, if your investment of 4 years earns you just 50%, it’s above average but definitely not awesome. However, I think her actual returns are awesome. Let me illustrate.

I asked if she bought cash or is she still paying a loan for it. She said she paid just 10% for the property which is RM30,000 for a RM300,000 property and the selling price is now RM450,000 which is extra RM150,000. She bought the property 4 years ago. Let us see what she has really earned in terms of %.

Four years ago, she invested RM30,000 as 10%. If we add all the other things like lawyers fee, interest payments etc, perhaps it comes to about RM40,000. If you have invested RM40,000 in FD and left it untouched for 12 months, it’s RM1,200 interest. If we calculate the compounded interest over 4 years period, total interest you earned is RM5,020. Seems ok. However, on the other hand, with this property, when she sells, she is earning RM150,000 which if you do the below simple calculation showed she earned 90% in ‘interest’ on a yearly basis.

RM150,000 (gross profit) / RM40,000 (gross investment) / 4 years = RM37,500 per year or in simple % is 90% per year.

Yes, I know she will incur the stamp duty and the lawyer’s fee but even if we add it in, the percentage is still going to be huge.

If I were to tell you that you may earn 90% interest per year on your investment, you would tell me, it must be a scam. In property investment, if you are very lucky, you may be earning such a return. BEWARE though because IF the property price does not increase when it is completed, then you may be suffering negative returns from your initial investment. Thus, the balancing act of risk versus profit must be considered very carefully and seriously because the truth is, initial investment itself is HUGE. This, versus the risk of FD which is nearly zero. Now you know why sometimes some people are just so worried about property investment that they prefer FD instead?

Yes, the above may be applicable if you had bought during the 2009 – 2011 period. Nowadays, the return is likely to be lower or may not even move for a while due to the current negative sentiment. Thus, please buy ‘safely’ and not try to buy ‘speculatively.’ Nothing to lose if you earn lesser but huge losses if you happen to be unlucky with the very price price per sf that you paid with the thinking that the sky is the limit. Remember, if your salary cannot suddenly fly, there’s no way for property prices to keep rising till it touches the moon. Happy buying.

updated on 6 May 2015

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When property prices rise too quickly, please worry.

We should be afraid if property prices rise too quickly

Personally, I am against double digits property price growth every year. I do know that if prices rise very fast, I would be very happy because my properties would give me faster capital appreciation. When the property price goes up and I sell the property, I will be smiling all the way to the bank. However, I still do not wish for property prices to rise too quickly.

Property price increase vs income increment

My reason is simple. Majority of us do not get a double digit income increment every year. For those who did, you are doing awesome but majority really do have just the typical few percentage increments every year. It could be 5%, it could be 3% and in some years it could be 7% but that’s about it. Thus, property prices rising by double digits meant that very soon the home prices have been inflated too high. We better be ready for it to burst some time in the near future.

The chart for the top
15 Countries with Highest Housing Price Growth

Double digit price growth is scary yeah

Example.
RM500,000 home with 10% increase every year will be over RM600,000 in just 2 years… Another 2 more years and this same RM500,000 home will become over RM730,000. This is a whopping RM230,000 increase in just 4 years and if we include the home loan interest for a 30-year loan, it meant that the same property would have added in more than half a million ringgit into only the interest just in 4 years!

When price is way beyond the salary for a few years?

What is the typical increment of people after 2 years? Assuming our salary is RM5,000 per month. Even IF the company provides us 10% increment every year, that’s just RM500 extra per month or RM6,000 per year! Compare that to the home price increase.  Then, compare that to the home price increase after 4 years. Yeah, now you know why double digit price increase every year is very scary for house prices. Once this happens, rest assured, the people will not be able to support the property price, we will have a bubble and the bubble will burst. This is why property owners better not be too happy when prices move up too quickly.

BNM will need to take stricter measures if there are signs of this happening

There was a time when everyone could just buy a property without any down-payment whatsoever. I happened to know that even university students were buying properties at the time. The increase in property price was quick and everyone was sharing how much they earned within a short period of time. This has been stopped BUT better be vigilant if there are signs that this is becoming rampant again.  We really do not want to destroy the market as it will affect everyone. I do think Bank Negara Malaysia (BNM) will always be monitoring. If ever they needed to consult some feedback from the market, they could contact kopiandproperty.com too.

Happy investing people. Property market is not a casino.

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Property prices. Rising too fast is bad for banks. (and owners too…unless)

If the property we bought for RM500,000 a few years ago is sold today and that new buyer is willing to pay RM600,000 for it, would the bank be willing to provide a 90% loan for this property based on a RM600,000 value? Or do you think the bank will prefer to use a lower value instead and thus may approve just a 80% loan instead, if not lower taking into account the possibility that even RM500,000 price many years ago may not be sustainable today? This is especially if the developer may still have units and thus the price has remained almost the same or lower?  By the way, when property prices rises too fast, it’s very risky for the banks. Is the situation in Malaysia moving towards this threat to the banks?

Article in themalaysianreserve.com
  Moody’s Investors Service Inc. 2020 outlook report for Asia-Pacific banks stated that risks from property loans will persist in Asia Pacific, but pose a greater risk for banks in Malaysia, Australia and New Zealand. Main risk came from elevated property prices and this is mainly because prices have appreciated rapidly in recent years.

It added, “Despite the cooling of price growth in some markets in recent years, lower interest rates in Asia Pacific can lead to a renewed surge in property prices, which would be credit negative for banks.” However, Moody’s also said Asia-Pacific banks have generally maintained good capital and liquidity buffers, and the probability of government support for these banks will stay high. Please refer to the full
Article in themalaysianreserve.com

Do read in full yeah. So there are now elevated risks due to the rapid increase in property price. However, the banks in Asia Pacific have generally maintained good capital and liquidity buffers and there is also the government support which meant that risks are there but support is also around too.

As for most of us, the property buyers, be reminded that it’s not something to be really happen if the home prices have appreciated way too fast. When this happens, we either quickly sell with the opportunity or risk losing it due to some bubble bursting and having to hold for many years to wait for the prices to make a comeback. Happy understanding.

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Property prices rising at fastest pace in 17 years?

Property prices rising at fastest face in 17 years?

Nope, of course this ‘super’ price increase is not in Malaysia. I do think most people are more worried about the surging Omicron cases versus rushing to view homes. Total property transaction numbers may slow down for Q1 2022 versus other quarters in 2022 as the number of cases has gone back to over 10,000 on 6th February 2022. My wish is a simple one, that this phase will pass again with out current high vaccination rate.

Meanwhile in the UK, property prices are rising at fastest pace in 17 years for the month of January. Note. This is ONLY for the month of January 2022 and referring to the rate of increase from month of December 2021 to January 2022. One month does not mean that it will continue for the remaining months of 2022. If it maintains, then it will be a very bad year for potential home buyers in the UK. That news as below.

Article in bbcnews.com

Nationwide
 building society’s chief economist, Robert Gardner said that prices rose by 11.2% year-on-year and 0.8% between December 2021 and January 2022 and this is the fastest annual pace for month of January in 17 years.

He said, “A 10% deposit on a typical first-time buyer home is now equivalent to 56% of total gross annual earnings, a record high.”

Mr Gardner said reduced affordability would be likely to dampen market activity and house price growth this year “especially since household finances are also coming under pressure from sharp increases in the cost of living”- with inflation hitting 5.4% in December, its fastest pace since 1992, and set to rise further in the coming months as energy prices go up. Please do read the full article here:
Article in bbcnews.com

Staying safe first in whatever we do

When a friend debated with me about a certain brand of vaccine from the US being better than the one from the UK, I just showed this friend the number of new infections in both US and the UK. Well, it’s really not that effective at stopping infections. Omicron is too new for the vaccines. However, vaccinations are necessary as it will be able to reduce the likelihood of going to the ICU once infected. This is why 99% of all new Covid-19 infections in Malaysia nowadays does not need hospitalisation.
Here’s latest news about PICKids.

Make plans for the 10% deposit instead

Remember to continue saving money instead of spending it all. Just too easy to spend it all these days with either Shopee or Lazada. Staying home may be a great time to research a bit more on the property market. Pick some properties and write down their advantages; close to office, size, amenities and even their disadvantages; over 30km away, small sized etc.

Choose a few and start to read more, check out the available units for sale and start making plans to view. By the way, I personally think we should view 20 units before deciding anything at all.

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Good news? Property prices are generally up in countries tracked by Savills Prime Index

This article takes the latest numbers from Savill’s latest publication for the capital value change by country. It is an index, so it meant that it takes a market view and definitely does not apply to some who wondered why Savills say the capital value change is positive when I had to sell my property at a lower price during 1H 2021.
If you like, you can refer to the full article in Savills.com here.

Capital Value Change by Country

When we come to individual countries, we can see Kuala Lumpur is that low number when it comes to price per square foot and it is also in that low number when it comes to 6-month capital value change too. Some may see this as negative. I think with our current situation, anything above zero is definitely considered positive.

This, coupled with the fact that the price per square foot being low meant that there’s room to grow if Malaysia is a little more pro-active in getting foreign investors like some other countries or continue to keep interest rates near zero like some other countries. By the way, I do not favour both the suggestions. Haha.

Slower is better, definitely. Apply the slowly but surely.

I prefer that we grow very slowly. I prefer we grow because it’s the local buyers and certainly not because of foreign buyer interest in droves. The occasional one or two can lah. However, if you are coming in droves, please feel free to go to the countries below. The one showing UNBELIEVABLE capital value appreciation despite the fact that it’s impossible for salary to keep up with such an increase.

Savills also have some conclusions but I do think it generally applies to those world cities where the buyers know very well and kept buying over there, then their rich friends got to know and they also buy over there and this cycle repeats. This is why it is perfectly okay for these wealthy buyers to continue buying other cities which are already much more expensive today compared to Kuala Lumpur.

Conclusion by Savills in their report

Savills say that when international travel returns, it will provide an increased supply of buyers for prime properties in some locations. It says that in Europe and North America, there is a persistence of working from home and this will continue to sustain desire for additional floor-space in properties.  All these are supported by the low-interest rate environment. Beyond that there is a sustained economy recovery globally too.
If you like, you can refer to the full article in Savills.com here.

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Property prices should come down, as long as ….

There is this event called
Housing and Property Development Colloquium organised by Kingsley Advisory & Strategic Initiatives (Kasi) Institute. The theme is “Reimagining the Housing and Property Industry in the New Malaysia.” (It’s a pretty wide topic. Perhaps what they meant is that let’s restart?) Anyway, the full article in
EdgeProp.my is here: Home prices can come down if certain issues addressed, says developers.
  Country Heights Holdings Bhdexecutive chairman Tan Sri LeeKim Yew said, “Yes, [the house prices can be brought down]. We developers would like to work with [the government] to bring down the house prices but there are certain issues [that need to be addressed],” He added,
“The contractors must cooperate with us also. If they don’t want to cooperate, we cannot bring down the prices. And we also need to listen to them as they could be facing some challenges, like shortage of workers.”

Trinity Group Sdn Bhd founder and managing director Datuk Neoh Soo Keat pointed out that there are still a lot of professional services that are taxable under SST and coupled with the rising labour cost, the waivers equate to about a mere 3% of cost savings in housing development instead of a direct 6% cost savings. He said,
“What we are seeing today is a lot of polices have been implemented on developers to reduce house prices but that is not going to solve the problem. Because the key is actually to increase our income level.”  Neoh said that the government should find
ways to increase income levels and tackle rising land prices, which is pushing up the housing cost and prices in the country. (I think this is a fair request even if this cannot suddenly happen overnight. As it is, the recent announcement that the minimum wage will only be adjusted by a mere RM50 per month is a strong indication)

Savills Malaysia group executive chairman Datuk Christopher Boyd said that the government should be increasing the supply of affordable houses in order to bring down the prices. He said,
“There are so many ways to skin a cat. How about this idea – the government identifies major areas of oversupply and approaches the owners or developers and trade those unsold units for vacant state-owned lands.
The government will then possess a whole bunch of unsold units priced at RM750,000 each and they can sell a 50% share in each of these properties to people whose budget is about RM300,000 to RM350,000. When it comes [time] to resell, the government [can] recoup its investment and the owner takes the other 50%.”  (Somehow I think this is an idea which is like how Danaharta absorbed the NPLs from banks and in later years managed to even turn a profit from the NPLs it took over)
Article in edgeprop.my here.

Personally, let me wait for what our Ministry of Housing and Local Government will be announcing soon before commenting. It should be something good? As for the issues discussed in this article, I think it’s clear that the developers are saying that they too wanted prices to drop but it’s not about just the SST. The actual numbers contributed by the SST will be lower than the 6 percent exemption. As for higher density versus lower density, I think a more appropriate way of looking at it would be from the public transport point of view. Is the public transportation ready for this? If the answer is yes, then policies should be implemented to ENCOURAGE people to take them instead of driving. Having 1,000 people walking from their homes to the nearest MRT station will be okay but having 1,000 cars coming out into the main road in the morning is not. Look at how Singapore and Hong Kong ENCOURAGED their citizens and we know that this is the POLICY way.  Happy following.

written on 2 Oct 2018

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Property prices staying put till 2016

I read one different opinion from the research houses of banks today. It also provides a different point of view from some property outlook seminars lately. Instead of the terms such as cautiously optimistic, Siva said that prices will not recover until 2016. He stated clearly that the prices would be tough for 2014. Instead of recovering within this year, albeit towards second half and beyond,
Malaysian property market will only start rising again in 2016. One of the main causes was due to the speculation in the primary market, so much that there were more properties bought than there are real demand. In other words, it was not bought by people who needs them but more on people who wants to flip.

In fact, he said that the days of 20-40% appreciation within just a few years are now over. There is however a silver lining. The secondary market would begin to show its shine. He gave an example, ‘A new launch in Bangsar could set you back RM1,500 per sq ft, compared to RM800-RM1,000 per sq ft for an existing property. The discount goes up to 50% in some prime areas,’

An analyst with TA Research also said something which has been happening, property players have noticed a marked slowdown in sales since the various curbs were put in place. I think this is already happening and we are starting to see a lot of launches are said to be super cheap, RM500psf etc.   My friend showed me a project in Old Klang road, a new condo for just slightly above RM500psf. I think the buying interest is still there but uncertainty meant that a lot of people may put off their purchase until it is clearer on where the market is heading.

One thing’s for sure. If new property launches continue to be cheaper, it will start to also affect the current market. This is indeed a good news for real buyers who need a roof over their head. Alternatively, if you believe what Siva is saying, the perhaps you may want to consider secondary properties as your primary choice instead. Oh yeah, remember REHDA announced that property prices will increase in 2014 due to costs? They represent the property developers. Siva said secondary property should be the main focus this year. He represents the real estate agents. Both arguments have its merits but the final decision should belong to your investment objective. Happy buying or waiting or thinking.

written on 14 Jan 2014

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Property prices surging in Q3 2020 (not Malaysia…)

Are property prices surging here in Malaysia? Statistically, nope. In fact even without any official statistics, no one is going to believe you if you were to tell them that property prices in Malaysia is on a rising trend. Not even me. Anyway, statistically, there has been a price correction in H1 2020 for the Malaysian property market. Earlier article here:
Price correction in the property market? Happened already in H1 2020
  Briefly, we have already had a price correction in H1 2020, at a time when the transactions for residential units were down but still above 75,000 units for H1 2020.

Looking to some advanced property market

So, shall we look at some positive news about property prices surging from a neighbouring country? Specifically, the country which we always use as a comparison to all the good things and the bad things? Let’s not get into details. We can talk about these over coffee once CMCO is over. 🙂

Photo by Palu Malerba on
Pexels.com

Article in asiapropertyawards.com
 According to
Singapore Business Review
, homebuyers’ confidence improved in the third quarter of 2020 as Singapore’s economy has graduallly reopen and this pushed prices for landed and non-landed properties to rise.

Prices for landed properties surged 3.7 percent in Q3 2020 while prices for non-landed properties rose 0.1 percent in the same quarter. This information is as per a report published by the Urban Redevelopment Authority. Christine Sun, the head of research & consultancy at OrangeTee & Tie, said that the price increase indicated improved consumer confidence as economic sectors have started to reopen.

Sun said, “Investors were scouring for gems in the market whilst owner-occupiers were snapping up ‘star-buy’ units released by property developers.”  Please do read the full article here:
Article in asiapropertyawards.com

Note the details

It says that there are signs of property prices surging… but in percentage term it is just 3% for landed and less than 1% for non-landed. What’s important to note also is that this situation happened after the economy gradually reopens as the COVID-19 cases in Singapore abated. Cases have been in single digit level for 8th October 2020. it’s already November 2020 currently. What we need to do is to keep watching the COVID-19 numbers for Malaysia as well  because there’s definitely this possibility here as well.

Property is always long term

Do not be too narrow focused on the ‘property prices surging’ part because it may change every other quarter but if we stretch this over a longer period of time, say 5 years or more, we would realise that property investment is a good investment where capital appreciation is concerned. Invest into a property with a long term view and make sure it’s not overpriced when you buy, then everything will be just fine. Buy, Keep and Sell if the capital appreciation has reached your target.

Conclusion

Malaysia is not an advanced property market. We need to have cue from many other advanced property markets. That was why for the longest of time, the property prices have not really moved that much until we realised that our property prices needed to play catch up. As at today, if we compare to some lesser developed ASEAN countries, our property prices in city centre remains on the affordable side. That’s the most important point which we need to know and be aware of even if simply buying is still going to be risky.

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