Property price you bought matters tremendously. Property price cannot simply just go higher.

A few days ago, I was speaking to a senior manager of  developer and we were talking about home prices. I told him that there has been a few occasions where my purchase was because I feel that the price I was buying into was safe. The price per sq ft for example. Depending on the size of the property, the price per sq ft could have been lower for bigger units and higher for smaller units. However, to buy a property of RM500 per sq ft for a typical 1,00 sq ft unit? That’s a safe decision. Not fool-proof or sure-won’t-die decision but safe enough if one is looking at this on along term basis.

Selling price depends on all costs of development, not just land price…

Ask any developer friend, how many can build a typical high-rise unit and then sell at less than RM500 per sq ft these days? I am talking about new developments. Perhaps the answer could be VERY FAR AWAY or VERY HIGH DENSITY. Else, RM500 per sq ft is a safe decision. The senior manager fully agreed and he said that land price can only go up, material cost can only go up and even he would want the company to pay him a higher salary year after year. This is why property prices go up yeah. It does not need to be that the value has gone up, just the price because of all these pressure. By the way, this is the same whether it’s in Klang Valley or JB.

Please note that for many mature areas, the price per sq ft is definitely higher BUT…

In many established and mature areas, there are nothing below RM800 per sq ft being launched. Perhaps one latest launching right next to the established and mature are could be priced lower a little but that’s about it. For these areas, the next question we need to ask ourselves is this. Are there people who would be willing and could be able to afford the place I bought a few years later at a higher price per sq ft than what I paid for? Always note that the property price can only continue to go up when people could afford them.

Why prices could rise quickly then?

If we remember the years of 2008 to 2013, the price of property could rise very quickly and that’s because the price prior to 2008 was RM250 per sq ft even for a proper condominium. Some in Kelana Jaya was even lower then RM200 per sq ft. I know because I experienced both. However, fast forward to today, it’s 2.5 times or 3 times higher. Did our salary rise by that much during the same period? This is why when we buy nowadays, we need to be aware that the buying decision can o longer be like last time. At the time, it was a simple pick and choose. Today, it better be a comprehensive due diligence before we buy.

Go back to the basics, use rental as a gauge

If the rental for the development could no longer cover the monthly mortgage on a 30-year loan, it means that for now, the price of the property is overpriced. If we are able to find a unit which could still give us a positive return, that’s a sign of a good buy. By the way, people say that the typical yield for property should be 5% or higher. This is so that the return is more than twice the rate of Fixed Deposit.

So how do you calculate your return on investment (ROI)?

Assuming you bought a property of RM500,000. Rental Income per month is RM2,500. Total expenses to maintain the property is RM5,000.   Gross Rental Yield calculation is as follows:

RM2,500 x 12 = RM30,000

(RM30,000 / RM500,000) x 100 = 6% per annum.

Net Rental Yield is meanwhile as follows:

(RM30,000 – RM5,000)/RM500,000 x 100 = 5% per annum

There’s also the calculation of
Net Leveraged Rental Yield
 which will give you an even higher yield % but I think let’s just stick to the above lower calculation first for now. Net Leveraged Rental Yield takes into account only the amount you actually paid and not the whole property price because you did not pay for the whole property yet but you took a loan for it instead.

Just because you bought higher does not mean people will keep paying higher

Please do remember that just because we bought higher and higher does not mean that people will be willing or even have the ability to pay higher and higher for it. Happy evaluating very diligently before actually buying it.  Buying a property is more than just watching a 360 Virtual Tour video and deciding that’s the property I want. At the very least, it involves driving to the area and actually speaking to the sales person who could answer your doubts and give you actual evidence showing you what he said. Cheers.

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Chart showcasing the price per square feet for four-rooms semi detached homes at Horizon Hills over the last five years. Prices are in Malaysian Ringgit. (Source: Propertyguru Malaysia)

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Every new iPhone launching comes with an ever higher retail price. Ever wondered why? If we believe it’s because it’s very good, then please ask those who bought Samsung, Huawei or Oppo for their opinions too. (I did not say it’s not good yeah.) Actually, the main reason for the price increase is ‘affordability.’ Within the marketing mix, the PRICE element has to be stretched to the maximum possible value that the consumer COULD pay. Many would argue the price is high because consumers are willing to pay. It’s actually because customers could AFFORD to pay. Otherwise, the phone shop is not going to give us that new phone just because we are willing to buy but we do not have the money in our wallet.

This is the same as property. Affordability will continue to drive the acceptance of paying higher for hotspots but also the acceptance of buying further away (with connectivity of course). I will be sharing on “The key driver for property demand will always be affordability” in the upcoming Starproperty.my Fair 2018. Let us look at what’s happening in the property market in Malaysia as well as learning from some of the more advanced property markets in the world today. See you next Sunday (18th November) @ 1pm inside KL Convention Centre yeah. If you notice, most of the speakers are all leaders of the segments they are in. I think I am the only one representing the usual 9-5 working Malaysian who actually started with a ‘peanut’ salary and worked hard to climb the corporate ladder and at the same time, investing into properties. I am still working full time today. See you.

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Property price and inflation have something in common.

There’s a long article with this title, “Property price hike inevitable?” here:
Article in themalaysianreserve.com
. Please do read the article for all the numbers and opinions why the people tell of reasons why property prices would be rising.  Among the reasons include hike in raw material prices, unfavourable logistics cost and even construction costs. Here is that article again.
Article in themalaysianreserve.com
.

Now here are some articles about inflation.
Article in thestar.com.my
 “UK executives expect inflation to squeeze profits”

Article in theedgemarkets.com.
 “IMF economist sees risks that inflation expectations climb upward — Reuters interview”

Article in bangkokpost.com
 “Expect inflation to worsen, not lessen”

Whatever happens, inflation is always present

In good times, inflation is seen as a menace. Central banks would do best to keep inflation at a moderate level. Increase the interest rates so that people reduce their spending and thus demand slows down. This will allow prices to be stabilised. In theory, this is how it works. In reality, inflation is ever present.

Remember that bowl of noodle we love? It used to be RM5 and then it became RM5.50 and then it became RM6 and so on? The seller would say the cost of materials have increased. However, the actual reason why the seller could price higher is because the customers could and willing to pay higher. Imagine if the customer just could not afford and chooses to eat something else…

The vendor to the noodle seller would say that the cost of raw materials have increased, so that’s why the vendor had to increase the prices. Again, if the noodle seller could not sell the bowl of noodle higher, than the noodle seller would stop buying from the vendor. In other words, because people could afford to pay, the prices would continue to rise. This is why inflation is always caused by demand vs supply. If demand is higher than supply, the pressure for prices to go up higher will start.

Too high price means nothing gets sold…

Property price is the same. Imagine a property developer selling properties which are priced out of this world. The properties would become overhang and just stay there forever. However, property prices continue to move up slowly because as people earn a little more, as people aspire to move into popular neighbourhoods, as the population keep growing, they would be willing to pay slightly higher for the property. That’s why property prices will continue to rise.

Owner’s mentality on property price

Add to the fact that once someone buys a property for RM500,000 this same person would not sell the property lower than the price he / she bought. This is why it’s not easy for property prices to fall. If a financial crisis do arrive and the person is now willing to reduce the property price, what has happened is that there are also fewer takers and banks also become much more conservative and does not lend money easily anymore.

Inflation happens. Property price goes up. It is normal and is happening all over the world except for the time when a financial crisis strikes…  After that, the property market recovers. Cheers.

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Property price and interest rate. What happens when rates rise in H2 2022?

Interest rates have been rising throughout the world. Here in Malaysia, Bank Negara Malaysia is doing it’s best to keep the rates unchanged to that it’s accommodative to economic growth. However, this may not be maintained for too long. Expectations are that the interest rate will rise in H2 2022 as well. Here’s that article earlier:
Interest rates will rise in H2 2022. Let’s be ready and be happy too.

Impact on monthly instalment for RM500k property

If rates rises by 25 basis points; 0.25%, then the impact on the monthly payment is an extra RM61 per month. It’s a 3.2 percent increase. If rates were to rise by 50 basis points; 0.5%, then the impact on monthly payment is an extra RM123 per month. This is an increase of 6.5%. Yes, considered quite significant. All these numbers will affect any potential loan applications where the applicant’s salary is on the borderline.

Impact on monthly instalment for RM1,000,000 property

 If rates rises by 25 basis points; 0.25%, then the impact on the monthly payment is an extra RM122 per month. It’s a 3.2 percent increase. If rates were to rise by 50 basis points; 0.5%, then the impact on monthly payment is an extra RM247 per month. This is an increase of 6.5%. Yes, considered quite significant yeah. All these numbers will affect any potential loan applications where the applicant’s salary is on the borderline.

We should not worry too much on interest rate increase

We can see that if it’s a RM500,000 property, the actual difference even if the rates are increased by 50 basis points is just an extra RM123 per month yeah. If we have to be worried because of RM123 per month, it may mean that we are over-stretched. If this happens, it meant that we are not managing our finances well. It’s not because of property investment yeah. It’s because we are overstretched financially due to some other commitments.

Happy understanding.

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Header Image by
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Property price based on inflation. 1 reason to show why this is okay.

How should property price be moving? How about property price based on inflation? As all of us know, inflation affects everything anyway. If there’s no inflation at all and we are still doing the same job, there’s no need for any increment. The increment serves a purpose. It is to ensure out life next year is not worse off compared to the year before. If we are taking up a higher responsibility, then the increment is for our contribution. It has got little to do with inflation.

Oxford Reference says this is the definition of inflation
: A general increase in prices in an economy and consequent fall in the purchasing value of money.

Briefly, it says that when prices increase, with the same amount of money, we would be able to buy less of the same item. In order to ensure we could buy the SAME quantity of the item, the amount of money has to go up. This is why we receive increments despite doing the exact same thing year after year. Just need to be very careful because one day, when they could hire someone to do the same work for less pay, they will hire that someone and we would lose our job. So, what are the advantages of having the property price increase following the inflation rate?

# Inflation rate is lower than the property price increase.  Take a look at the two images below. One shows inflation rate, another shows property price movements.

Image Source:
https://www.statista.com/statistics/319033/inflation-rate-in-malaysia/

Highest point for inflation is 5.43%. Never mind what you think about inflation numbers being inaccurate or that for some people, the inflation number is actually higher.  They used that same basket of goods over the years, so it’s a good benchmark for movement over the years. Well, for the last few years, the number has been close to zero… Average number over the years is around 3%. I think for many, the typical increment is 5%. So, at least that’s why so many people could still afford to buy a RM15 latte these days… (pun intended)

Meanwhile, for property price over the years, please refer to the image below:

Image source: housingwatch.my

We can see clearly that on an average basis, the property price has been increasing by 6.3% for the periods of 1990 – 2013. In 1998, it was close to negative 10% but generally, 6.3%.  If we look only at the years from 2014 to 2019, the average has dropped to 6% per year. Looks like the trend is down which is good for the many people who are still saving up to buy their very first property. By the way, there’s no need to time the market if we are buying for own-stay.  Buy and stay. 10 years later, if the average increase had been 5% per year, it’s more than twice the FD rate…

Property price based on inflation
?

A RM500,000 property would increase by RM30,000 if we follow the average of 6% per year. In other words, every month your property is increasing in price by RM2,500. I do think this is quite high if this should be happening every year for the next 10 years? For the benefit of more Malaysians yet to own a home, let’s not wish the property price to keep increasing 6%, let’s make it lower.

Meanwhile if the same RM500,000 property price were to follow inflation instead, then perhaps it would be around 3%.  That’s RM500,000 x 3% = RM15,000 per year. On a monthly basis, the property price is increasing by RM1,250. By the end of 30 years, the appreciation would have been a simple RM450,000.

Before everyone now thinks that the number is quite good, do note that with the mortgage payment, we are also paying interest… and if we were to buy a RM500,000 home with a downpayment of 10% and a 3% interest rate by the end of 30 years, we would have paid an extra RM233,000 for the home. Do look below:

So, home ownership if stretched over a long period of time, should be a good investment. At the very least, it takes away the effects of inflation. This is why home ownership has also been known as a natural hedge against inflation. Anyway, all these are just WHAT IF situation yeah. No one is able to control the rate of property price increase. Can only wish for this, “Property price based on inflation.” Happy understanding. For own-stay, do proceed.

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Property price because of demand and supply, explained.

Depending on whom we ask, property price will always be rising or falling. The same person who kept telling you that prices are rising may want the price to keep rising for his benefit. Property developers would also continue to tell that property prices will always be rising. There are many reasons for them in saying so.

At the same time, the same person who kept telling you that prices are going down may want the property price to keep going down or perhaps the person is suffering because he could not sell the property at a price he wants. Let’s look at the actual reason based on the economics theory of demand and supply.

Property Demand and Property Supply

Property price is affected by the demand and the supply of property. More demand than supply, the prices move up. More supply than demand, the prices go down. However, we need to note this. It’s not the total demand versus the total supply though. It’s usually specific demand versus specific supply.

I give you an example. Someone wanting to buy only into neighbourhood A or B does not care if supply in all other neighbourhoods are increasing, unsold or even already under overhang. They just want the properties in neighbourhood A and B.

Thus if the supply of property in neighbourhood A and B is not increasing, then the demand outstrips supply and prices would move up because the sellers in these two neighbourhoods; A and B has better bargaining power. Meanwhile the prices in all other neighbourhoods where supply is higher than demand may fall because the buyers have better bargaining power.

This is why property overhang does not mean the whole market will suffer from price drop

I give you three questions for overhang property and price.

#1 – Are people rushing to buy the overhang properties? Probably not, that’s why it’s in the overhang category.

#2 – Are there other properties on sale beyond the overhang properties? Probably yes, both new ones from developers and also existing ones from the secondary market

#3 – Are there still neighbourhoods where people continue to think highly and neghbourhoods where people still think lowly of? Probably yes and this will remain forever since this is also the same in all advanced property markets.

Property price is also supported by inflation

With inflation, cost of goods go up. Thus cost of construction goes up. Cost of food goes up. Thus, salaries would also move up with yearly increments. This does not mean that the value of money is going up. It means that the price we are paying for the property will go up but in actual fact, this is just to cover for inflation. It means that the seller could maybe sell at a higher price than what he bought many years ago but the amount of money he gets does not mean he can buy more things. He may only be able to buy the same number of things.

Would everyone get rich from buying a property?

I think majority may not but they will not be worse of unless as usual they bought something overpriced. This is also why property is just a natural hedge against inflation. Basic idea is that we do not get poorer due to inflation if the property we own increases in price following inflation. Not so much of getting very rich from it. I have repeated this like 988 times but hey, let me repeat one more time. If we intend to rent versus buy, renting is forever… and ever. Period.

If it’s SURE profit, we may already be too late

Happy understanding and remember to do due diligence when buying. If it’s too easy, someone would have gotten to it before us, usually. There are also no other links below for you to click and buy certain properties too. kopiandproperty.com is not a property listing site yeah. Cheers.

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Property Malaysia: Slight price drop and rental market growth for 2017

PropertyGuru brought together a distinguished panel of industry experts and speakers for its PropertyGuru 2017 Property Outlook Forum to provide insights into the prospects for the Malaysian real estate sector in 2017. I think many are waiting for some insights because of the current challenging overall market in Malaysia. (Especially when it comes to sentiment and the recent ringgit’s movement downwards). The panels include Dato’ Charon Mokhzani, Managing Director of
Khazanah Research Institute
 (KRI), Datuk Seri FD Iskandar, President of the Real Estate and Housing Developers’ Association Malaysia (REHDA),
Prem Kumar, Executive Director of Jones Lang Wootton
, Gary Chua, CEO of SMART Financing and Chris Tan, Managing Partner of CHUR Associates.

Many things were reported but I think this should be something interesting to note.  Remember some recent predictions about the
recovery happening either in 2017 or even 2018?
 Well, according to the newly launched PropertyGuru Property Price Index, the selling price for properties would be dropping slightly and rental market would be growing with more buyers opting to rent temporarily because of the inability to qualify for loans as well as the present absolute high prices of homes. In brief, the market continue to be good for potential buyers but the
quality of these potential buyers
 are not that good. In other words, they either need to get the banks to relax the lending requirements or the selling prices would need to drop to a level that these buyers could afford to buy. I am not sure which one to support because both are considered negative for the market.

Some details about the PropertyGuru Property Price Index 2017. It is showing the average asking prices in mid-2015 was RM586 per sq ft while mid-2016 saw it shift to RM554 per sq ft. There is a possibility that the average asking price for 2017 to drop a further RM35 per sq ft – RM40 per sq ft. These prices are most evident for high-rises. For homes priced between RM500,000 to RM700,000 there would be lower sales due to the
highest number of loan rejections.
  Two other reasons were also stated; the rising living costs and smaller growth in incomes. I personally think if majority of everyone continue to be negative with the market, including all the industry players and every forum panelists in every property related forums, the 2017 property market would continue to be a slow and falling one. Perhaps  we are going into a vicious cycle and it would take lots of effort from everyone for the property market to stabilise and start growing again. Let’s keep following all these developments but at the same time, stay objective and keep looking and viewing. Good opportunities may not come by often. Cheers.

written on 1 Dec 2016

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Property price to accelerate with the ECRL? Where are these properties situated?

Someone said property price will accelerate with the East Coat Rail Link (ECRL).

When someone says anything about property price dropping, I will write about it. For example, this one:
70% price drop prediction (click to read)
  Thus, when someone says the opposite; price will be increasing because of some reasons, I will also write about it. This is to be fair to both sides. Reminder yeah, whether up or down, read the reasons and decide if you agree. Then, take the appropriate actions.

If you think the price will be going down, then of course selling the property quickly will help to minimise the losses. If you think prices will be moving upwards, then of course buying quickly should allow you to enjoy capital appreciation too. Just do not keep sharing, sharing and sharing but never buying or sharing. Here’s that piece of news about property prices accelerating in the near future with the ECRL.

Article in themalaysianreserve.com
.
  Centre for Market Education fellow and Bait Al Amanah economist Fariq Sazuki said with the latest ECRL realignment, industrial towns like Serendah and Kapar in Selangor may see a rapid increase in property value.

He said, “The areas nearby ECRL stations, namely Kapar, Puncak Alam, Gombak (in Selangor), and even Bentong (in Pahang) may blossom to become highly demanded residential regions for those working in Port Klang and industrial areas in Selangor.

CCO & Associates () Sdn Bhd director Chan Wai Seen agree with ECRL benefiting property owners around the stations. However, he said, “However, I personally think that the sustainability of the prices will depend greatly on the efficiency of the ECRL after completion. When you look at the impact of KTM ETS (Keretapi Tanah Melayu electric train service) services, it does not really create a significant impact on the local property market.”  Please do read the full and comprehensive article here:
Article in themalaysianreserve.com
.

Latest update about the ECRL.
 Transport Minister Wee Ka Siong shared that this about the ECRL construction work, “was in full swing” and was progressing at an “encouraging” rate of 21.39 per cent as of March 2021. He also shared that the works at more than 300 locations will commence by year-end of 2021 involving earthworks, bridge construction as well as tunnelling, which will drive the construction of the ECRL into its peak period.
Full news article in nst.com.my here:

Overview about the ECRL from the Malaysia Rail Link’s website

The 665-km East Coast Rail Link (ECRL) will traverse the East Coast states of Kelantan, Terengganu, and Pahang before linking the Klang Valley on the West Coast of Peninsular Malaysia. As a national infrastructure, the ECRL will link cities and towns as well as upgrade public transportation along its rail network.

At speeds of up to 160km/h, the ECRL passenger trains will significantly cut travel time from Kota Bharu to ITT Gombak to approximately 4 hours.  The ECRL is also expected to spur commercial activities, drive investments, increase job opportunities, and boost tourism activities along its rail network. The ECRL Project is expected to be completed by end of 2026.
 Click here for even more details about the ECRL.

When trains could travel at 120km per hour…
  The ECRL could travel at speeds of up to 160km per hour. The ETS service by KTM (which everyone who’s on it thinks it’s comfortable and fast enough versus driving for example) is a good example of how a good train service will enhance connectivities among all the towns on the line. We could drive to many of the towns along the ECRL line or we could also take the trains in the future too. If all these towns offer something for tourism, they will be rejuvenated, especially the smaller towns where many of the young population have migrated to bigger cities for work.

How does the alignment look like?

Image source:
http://www.mrl.com.my/wp-content/uploads/2021/03/ECRL-Northern-Alignment-Updated-2632021-01.jpg

Happy following.

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Property price expected to rise in 2022

Property price expected to rise in 2022

This is not an article about the property price in Malaysia yeah. This is the property market in the largest economy in the world, as at 2021; the U.S. property market. By the way, if the advanced property markets are showing a negative sign, let’s understand that this will affect the developing economies. This is why the stock markets are usually following the trend from advanced economies.

Let’s look through some of the comments in the
Article in cnet.com
  Dietz says that home owners are in a fortunate position due to skyrocketing home values. However, at the same time, this has created a difficult situation for prospective homebuyers. In fact this situation is unlikely to change in 2022. With the potential for higher interest rates in 2022, this will mean even more headwinds for buyers throughout 2022.

Federal Reserve has indicated that it will raise interest rates in 2022. With a rising inflation, it will also be increasing both the cost of home building materials and skilled labour. The National Association of Realtors’ is expecting a 5.7 percent increase in annual median home prices. Nevertheless, mortgage interest are still quite low. In fact, this was the comment in the article, “Mortgage rates are still at historical lows, and it’s been harder than ever to predict where things are going thanks to the ongoing COVID-19 pandemic.” Please do read the full article here:
Article in cnet.com

Home owners in Malaysia are also very fortunate

Just like the home owners in the US, home owners in Malaysia will also be fortunate moving forward because the lockdowns are lifted and the economic activities are picking up. It’s also quite certain that the GDP numbers for Q4 2021 is likely to be the highest for the whole of 2021. My good friend has said that his AirBnB unit is now fully booked every weekends ever since inter-state travel has been allowed again.

Inflation and Interest Rates in Malaysia has the same signs as the U.S. as well

When the inflation moves up in the U.S. their interest rates would also have to rise to counter this. It is the same case here in Malaysia where our inflation has started to show signs of moving upwards. However just like the U.S. the current interest rates for home loans remain the lowest in history. I have never seen home interest rates of 3 percent from the time when I started buying a property until today.

Will property price be rising then?

I am not an analyst from a bank with lots of data to crunch. However, I do think that good times should be coming back especially if we compare to the bleak times of 2021 or even 2020. The latest Covid-19 variant Omicron seems to spread faster but thus far, it has not been showing a much stronger hospitalisation and death rates. There are signs that these two effects are lower for Omicron versus Delta.

Happy anticipating 2022 and happy viewing.

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Property price can be this expensive? A few millions for less than 160 sq ft?

Micro-units as affordable homes

A typical car park size is 8ft x 18ft. That’s a size of 144 sq ft. Can this 144 sq ft fit in a bathroom (small one), a single bed, a writing desk and even a closet?  Actually, yes. In fact it’s already proven in micro units in Hong Kong and it’s the only way property could be made affordable enough for the people. Here’s
one article about the micro units in the Bloomberg.

A classmate of mine from Hong Kong told me that when her family plays mah jong, one person has to sit very close to the toilet because of the size of the flat. With micro units, there’s no space for a mah jong session unless the whole unit is empty of things.

What’s the size?

Typical single bed size is 3ft x 6ft and that’s 18 sq ft. Small bathroom is 6ft x 6ft. Standing shower lah, please don’t tell me you expect a bathtub… . A writing desk (5ft x 2ft). A closet (5ft x 2ft).

That’s 18 sqft + 36 sq ft + 10 sq ft + 10 sq ft = 74 sq ft. There’s another 70 sq ft of living space in the 144 sq ft space. In some countries, this is all the space one gets when they want an affordable place to stay. I am always grateful that I continue to have choices and all the choices I could afford are still way above most of the countries below.

How much real estate could you buy for US$1 million (RM4.21 million)

One can only buy 229 sq ft for RM4.21 million in HK while in New York, you can buy 358 sq ft. This is then followed by a city I have visited before, Paris at 455 sq ft. Even in Tokyo, for the same amount one can get almost 700 sq ft which is pretty okay! By the way, there’s no need to stay inside Tokyo because of extensive bullet train networks in Japan yeah. It could be a 200km distance away and the total journey is just 45 minutes or so.

Source:
https://www.visualcapitalist.com/how-much-prime-real-estate-could-you-buy-for-1-million/

The other places which are within the top 20 list

Please refer to the list below. Monaco beats Hong Kong but that’s also because Monaco is a very tiny little dot. I have been to Monaco before. Really a small place indeed.

Will Kuala Lumpur be like these expensive cities?

Frankly I do not think it will ever be. However, please do remember that once upon a time, these cities used to be much more affordable than today. If we were to ask the people there at the time, they would have also said it’s impossible for the prices to be like today. When their prices keep going up, all other cities in the world will just follow. Kuala Lumpur definitely included.

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Property price grew fastest since 2007. Why and Where?

One important factor in the fight against COVID-19 is to have the population to be vaccinated. In the UK, 59 million doses had been given of which over 37 million are first dose. This means 70 percent of the population aged 18 and above has been vaccinated with at least one dose
and 40 percent with two doses. Source here.
This is important and this is why UK has ‘reopened.’

Article in channelnewsasia.com here.
Briefly, people could eat in restaurants, drink inside a pub, go to a museum, hug friends and visit one another’s homes. A ban on overseas holidays are being lifted and travel is now possible to a short list of countries with low infection rates. There are worries about a new strain of COVID-19 but at the moment, it’s being monitored closely.

Anyway, the house prices across the UK also grew the fastest pace in March 2021 and this is fastest since shortly before the financial crisis hit in 2007.
 Article in theguardian.com
 Average UK house price climbed 10.2% in March year on year and this is up from 9.2% in February. This is the highest annual growth rate the UK has seen since August 2007,
said the Office for National Statistics
. The reasons stated including buyers rushing to take advantage of the government’s stamp duty holiday which has been extended to end of June.

Annual price growth was highest in Wales and Scotland. Average values increased over the year in England to £275,000 (10.2%), in Wales to £185,000 (11%), in Scotland to £167,000 (10.6%) and in Northern Ireland to £149,000 (6%). London’s price is only growing at 3.7% and this suggested that people were moving out of the capital city. However average price remained the most expensive at £500,000 in March.
Article in theguardian.com

Vaccination is a must. Have you registered?

My vaccination session is tomorrow (22nd May) at 9am.  This is doing my part in the fight against COVID-19.  If we do not vaccinate fast enough, the infections will be faster. That will be a long way to recovery. The latest batch of AstraZeneca vaccines have arrived and the seniors could now also register for it starting from 23rd May.  After that, it will be opened to everyone from 27th onwards. This is the website to register.
https://www.vaksincovid.gov.my/
 Please do the right thing yeah.  Just need to remember that the UK is major user of AstraZeneca.

Registration is still extremely low.

Latest number as follows. Some states are unbelievably low.

Without sufficient vaccinations, the number of cases would continue to increase and soon the economy will suffer as a total lockdown may be needed again.

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Property price? Higher by 6 figures in this country. That’s just within one year. If you have a property in Australia, this is an extremely good news.  If you do not own a property in Australia like me, then we can just read the news and get to know about it.

First property just got harder

If you are an Australian who’s working very hard to buy that first property, then it just got harder. Covid-19 has not really pushed down property prices. Let’s look at some latest detail in a country where Covid-19 is considered to be generally under control.

Article in www.abc.net.au
   In context, Australian property values are 18.4 percent higher currently versus this time last year. It also meant that this is the fastest annual rate of growth in 32 years (since July 1989 to be exact)

“The annual growth rate at the moment is trending higher — in fact, it is 3.6 times higher than the 30-year average rate of annual growth.”

In dollar terms, Australia’s median property price has risen by around $103,400 (RM315,820) in the past year (which equates to about $1,990 (RM6,078) per week).

In comparison, Australian wages are growing at a much slower pace (about 1.7 per cent annually), underscoring the worsening affordability issues.

Image source:
https://www.abc.net.au/news/2021-09-01/property-housing-corelogic-house-prices-rise/100423896

Salary must catch up, else property market price is not sustainable

If we have to spend ever bigger portion of our salary just to pay for a home, this meant that the financial pressure will get ever higher.  The reason is a simple one, when we have to spend more for a home, we have lesser to spend on other things.  Our quality of life will then start to deteriorate. We may have to eat lower quality food for example. That’s not such a good thing on a longer term.

If we have to spend a very high portion of our salary on a home and some unforeseen expenses come in, we will suddenly be short of cash and we may incur additional debts for this unforeseen expenses and our financial healthy has just gotten worse. These are two examples why property prices which is rising much faster than salary growth is unlikely to be sustainable.

Average salary of professionals in Sydney?

As per
payscale.com
, it’s an average of AUD76,000 (RM232,000) per year. Monthly wise, it’s AUD6,333 (RM19,343). Do take a look at the median home price in the chart below to have an idea about whether it’s getting easier or harder to buy a property if the property price continues to rise at the same rate as the past 12 months.

Stay focused on earning higher and spending lower for housing

What we can do is to keep earning higher through growing up in career or even have another income stream. What we can do to keep spending lower for housing is to buy smaller units to manage the home price or buy further and just manage the travel time. Over time, home prices only need to rise following inflation and this home will help us hedge against inflation.

Waiting may not be the best option when we look at all the advanced property markets in the world today. Oh yeah, for those pointing out that perhaps a financial crisis may happen and property prices will all be dropping, you are right as well. In fact in all past financial crisis, home prices usually drop too, in-tandem with all other investments.

Just need to remember that during a financial crisis, it may be quite scary to buy a property. We may fear uncertainty with our job security during that time. Secondly, financial crisis, whether 1998, 2008 or even the next one will usually recover. When they recover, prices do rise again. Happy deciding. Any investment is okay, does not need to be into property.

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Global cities show property price increase for prime property

There’s no property price increase in Kuala Lumpur property market, correct? Actually, quite true. There’s barely any movement based on latest numbers.

Well, according to Knight Frank’s Prime Global Cities Index for 3Q 2020, Kuala Lumpur is nowhere to be seen anywhere within the top 20. It’s not just us, our friendly neighbour Singapore is also out of top 20 as well. I consider this as good news for many buyers who wanted to enter the property market but has yet to take any action. As for the full article with more information and even the top 20 chart, let’s look below.

Photo by Pixabay on
Pexels.com

Report by Knight Frank in knightfrank.com (click here to view full report)
Let’s just run through three super easy to understand images too.

Figure 1 shows that property price increase has continued to register positive annual growth. This is an index aggregate for 45 cities. In other words, some cities are show a positive growth while others show negative but on an aggregate basis, the number is a positive one. Please do note that this positive number is at the lowest point if we compare this over all the different quarters all the way back to beginning of 2018.  Please do not be too positive yet. Let’s look at Fig 2 after this Fig 1 image.

We could see that the number of cities with an annual increase in price is still bigger than the cities showing a decline in prices. However, if we look at the trend, the number of cities showing a decline in price for many different reasons are increasing. So, where is Kuala Lumpur then since it’s not within the top 20?  Please do refer to the two other images to follow.

This image shows the top 20 cities with prime property price growth:

Kuala Lumpur and Singapore belong to the bottom half. Please refer to below image:

Good news for buyers who did not enter the market, yet.

As we could see very clearly, Kuala Lumpur has shown a drop of 3.6% versus the same quarter in 2019 and on a quarter on quarter basis, we are seeing a drop of 1.1%.  If every quarter we drop by 1.1%, then on a yearly basis, we are going to drop higher than the 3.6% versus the same quarter a year ago. Anyone telling you that KL has property price increase may be telling about a very specific property versus the market.

Do note that Knight Frank says this is for prime properties. It does not include the ‘bread and butter’ properties for the most of the working professionals. Therefore, do not be too surprised if that property you were eyeing did not show any drop or may have shown a much bigger drop that what was shown in the image above.

Conclusion

Generally, the buyers of prime properties may also possess a stronger holding power as well. Thus, fluctuations in the property market due to some unforeseen circumstances such as the current COVID-19 pandemic is unlikely to affect them as much as someone who’s working for a monthly salary and may have had a temporary salary cut or even lost their jobs and is now looking for a new one.

 Thus, the above charts are good for reference but do not think too much about it. At least now you know your rich friend was not lying when they tell you that the property price of their prime property has dropped recently. For the owners, are you now waiting for property price increase? Happy reading and understanding.

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WOW. Property price is 30% higher than the peak in 2007. Nope, this is not Selangor property or Kuala Lumpur property. This stats is for the UK.

So, what happened in 2007 and why was it said to be the peak? If you did not know what happened after that, it was the 2008 mortgage crisis which crashed the property market. Property prices should move up but should not up like a Formula 1 car. That spells disastrous no matter how we want to be positive about it.

The reason for this higher price according to Zoopla is this: Stock shortages are helping to push up prices and houses are out-performing flats.

There are two parts to this Zoopla message yeah. First, there’s a stock shortage. So it meant that supply is not coming in or demand is just too high, suddenly. Secondly, it says that landed properties are performing better than flats. It did not say flats are not performing yeah. Haha.

Anyway, this is the
 article in theguardian.co.uk
  The property website Zoopla said the average price of a home was now £230,700
 (RM1.35 million)
 and this is 5.4% higher than the same month one year ago. (Okay, 5.4% does not seem that out of the ordinary)

The report said that home prices in UK in June hit a new high and this price was 30% higher than the peak before it was hit by the 2008 financial crisis. (Ok, they like to say it’s financial crisis but truth is, it’s a mortgage crisis due to greed and started from one country)

This sharp increase had come as the number of homes being put on the market for sale had dropped by 25% in the first half of the year compared with the same period in 2020. At the same time, demand for houses was more than double in the years before the pandemic and family homes were particularly popular. Do read the article in full here:
article in theguardian.co.uk

Demand can also be sudden because of circumstances

If the whole Malaysia did not have Mamee for 2 years, when Mamee supply comes back, it will be hard to get our hands on one pack. People may just go crazy, buy way too many and eat until… suddenly.. they realise that Mamee will still be around from now onwards.

Pent-Up Demand, maybe

Property market will definitely be vibrant if there has been no activities for 6 months… or more. What we need to really see is whether this demand will continued to be supported by real economic growth of just that impulse to buy and the inflated demand because all of the demand came at once. If we were to average out the demand for the first few months, maybe the numbers may be almost the same on a monthly basis yeah.

Same advice, be safe and rational

I repeat the same advice people give about the stock market. If too many people got too carried away and start buying as if the market will reach the sky, that’s when the market will crash. Property price is a function of salary. If salary stays almost the same or lower but property prices goes up, then be ready. The support is unlikely to last. Happy understanding.

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Yes! Property price is dropping.

Yes! Property price is dropping. It’s real yeah. It’s dropped in 2Q 2021. read on and there’s a chart down there too.

How’s the title of this article? Sensational and gotten you to read?

There are so many property experts I learn from everyday because I needed to read in order to write. However, when it comes to writing, I do think writers of property investment article should at least own a property and thus understand a little about the dynamics of the property market, the property owner (if they are one) and the property buyer (they were one).

Once they understood, then hopefully their article title can be more objective and not as sensational.

The unfortunate thing about sensational title is this, people read just the title of the article and assume all the rest.

Then, when there’s an opportunity they will then ask me this question,
‘I heard the property prices are going to fall according to XXXX media. When do you think it will be dropping?.’

Today, let’s just answer this question again

This is despite having answered it countless of times. By the way, I am not from the developer, I do not need to keep telling you to buy now. I am also not from the real estate agency, I do not need to tell you buy the property I am selling now. In fact I also do not run some courses yeah. What I share is just what I believe. True or not, up to you to decide okay. It does not affect me yeah.

Now, coming to the property price, this is from
housingwatch.my a BNM related website.
Image below.

Does it show property prices dropping?

Looking at just the line, it does really look as if property prices were on a downtrend… right? By the way, anything downtrend means it’s negative, so it has be below the zero line. If the line is above zero, that means it is an increase, no matter how little, how low or how small that increase may be. Above zero equals to positive and that’s a growth.

Look again at the image above. How many quarters was the line below zero? One? Yes, the answer is one time from 3Q2014 all the way until 3Q 2020. There was one quarter where the line was below zero. That’s a minus 0.9% yeah.

Will the line still be below zero for the next few quarters? We have to wait to see what happens, I have no idea. However, what is also shown was that if we stretch the line from 2013 to 1990, then the average price increase was 6.3%.  Meanwhile if we look at 2014 to 2019, then this increase has dropped to just 6%. It does show a trend of lower growth yeah. Who knows, in the next 20 years, the growth average may even be below 6%.

Now, for the question again, are property prices dropping?

Yes, for 2Q it is! Should I now be afraid? Sure if that’s how one feels about property investment. Just need to remember that in those good years, we still have people who got burnt in the property market. Bought too high… bought too many… bought the wrong one… and many more reasons.

At the same time, real estate has also continuously created new wealth for the ones who bought undervalued, bought within financial capability and bought the right one. Happy knowing the answer based on the stats yeah.

But I thought there are now more affordable launches!?

This statement is definitely true as well. There were days when homes were pushing above RM700,000 but these days, the push is to be closer to RM500,000 or even lower. The push is for smaller sized landed homes which many call starter homes. The push is for lower prices for high-rise with a higher density.

Basically the push is for NEW properties to be priced lower than previously and developers do this by building more units on the same piece of land (with approval from authority of course) or they build further away where land cost is more manageable. So, did property prices move lower in this case? Yes, same price for a smaller home, further away. What happens to the prices of the properties which are bigger and nearer to the city centre then? Happy answering.

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Property Price is up 20% and rental has doubled!?

Of course this bad news for tenants and great news for property owners is not Malaysia. Any home owner who told you that he / she managed to double the rental meant that he / she was renting at an unbelievable rental previously. Probably due to effects of Covid-19 pandemic and lockdowns. Some homeowners were forced to give heavy rental discounts. Some owners were forced to sell way below their asking prices too.

Everything depends on the ‘stronger’ party

However, think a little. If property prices can increase by a lot, that means home owners have more negotiation power or the home buyer? Whatever answer you have, think what will happen to the relationship between the home owner and the tenant. Who would have a stronger negotiation power then? Your answer will reveal why this is now happening in Turkey.

Article in nst.com.my
  Consumer inflation is at 61 percent. Housing Costs are up 20 percent within the past year. Industry data has shown that rents have doubled.

Experts say that the demand for housing outstrips supply. A yoga instructor wanted to rent her own place but she was told that her offer is unrealistically low. After learning of this from the real estate agents, she said, “To be able to afford these rents, I need to stay at home and not spend anything else.”

Data from real estate website EmlakJet and from competitor Sahibinden analysed by Bahcesehir University shows rents nearly doubled over that period – but evidence on the ground suggests even that is an underestimate. Please do refer to the article for more information and details.
Article in nst.com.my

Need an answer about long term negotiation power?

As long as more new homes are built versus new demand, the negotiation power stays with the tenants. They can tell the home owner that it is easy for them to move to another place if the home owner decides to increase the rental. The home owner would also have to follow their demands too. Just look at the demand for properties during the Covid-19 lockdown periods. The home owners were truly under pressure from their strong tenants. In fact some tenants did not suffer any financial difficulties but still insisted that the home owners give them discounts.

On a longer term basis, with the help from inflation, property prices do slowly inch upwards. When this happens, the rental would also slowly move upwards too. Today, there are already home owners who is creating extra rooms and renting out the rooms separately versus the whole house.  Would be good to think why they could do this and why people would rent these small rooms with just a bed and a desk and willingly pay rental for it…

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Property price Malaysia: Yes, Q-o-Q, it’s negative!

This title is dedicated to all the property buyers who said they were waiting for property prices to drop before they jump into the property market and buy their dream property. Negative number means property price on average is dropping, especially if we compare the Q2 2021 to Q1 2021. It is a negative 1.6% for quarter on quarter.

This is the latest information from National Property Information Centre (NAPIC) of Valuation and Property Services Department (JPPH).
If you like to click and download their file, do click here.

Negative price growth Quarter on Quarter means opportunity, right?

Please do take a closer look at all the quarters as per the above image from NAPIC yeah. From Q1 2016 all the way to Q2 2021, what do we see? How many quarters were the price showing negative growth? There were TWO of such quarters. In Q4 2019, when compared to Q3 2019, the price growth was a negative 0.3%. It is now negative 1.6% for Q2 2021 vs Q1 2021. Would it continue to be negative next quarter? Your guess may be better than mine.

Positive price growth Quarter on Quarter means opportunity, right?

If we are investing because we want continuous price appreciation, then looking at the image above, it does seem that property is a long term investment right? Would you like to stretch this price growth numbers over a longer term? Instead of 2016, let’s look at 2020 instead? Image of Malaysia House Price Index (MHPI) as below.

Happy deciding. Waiting is perfectly fine too. Just remember to do something while waiting.
Are you waiting to buy a property? Me too
.

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Property price movement? Landed vs high-rise, again? 2016 – 2021?

Property price movement? Landed vs high-rise, again?

Just a few days ago, a close friend told me that he would be buying a high-rise for RM1.4 million. I gave him my views slowly (because he is a close friend) and told him that since it will be his home for a long time, it’s up to him. Even if many could not afford that RM1.4 million property today, chances are they could in the future. Mostly due to inflationary pressure as well as salary increase and successful entrepreneurs becoming richer too.

Then for the next question, would high-rise units also increase in price? Do property price increase also included high-rise? Which type of property has the highest property price increase? Let’s not debate. Let’s just look at actual numbers from our National Property Information Centre (NAPIC)’s latest data yeah.  If you suddenly feel scared that the lines are going downwards, please look at the detail to have an idea whether it is a negative number or positive yeah.

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Focus on the property price, not the financing options.

This was the earlier article about the peer-to-peer (P2P) home financing which was announced by our Finance Minister Lim Guan Eng just days ago:
risk worth taking to own a home
. This is HBA’s point of view.
Article in MalayMail.com
  In a statement, HBA said it “respectfully disagrees” with the initiative, pointing out that the real problem is the high price of houses, and not financing options. It added, “Malaysia is facing a housing crisis where the price of properties is too expensive in comparison to their incomes. The crux of the problem is ‘affordability’ and not ‘lack of financing’ as there is adequate liquidity in the banking sector.”

It also shared its concerns about growing property speculation, property scams and bad debts, as the government will be providing a buyer with a poor credit record access to “easy credits” with the P2P scheme. HBA equated the scheme with a “legalised money lending” system. It added, “Who is going to ensure the peer who invested will obtain a return? Who will enforce the lending arrangements? What happens in the event of default? Is the Securities Commission going to undertake additional duties? This is a legalisation of money lending without the need for a licence.”

Besides the P2P financing, the HBA has also stated its disagreement with the new 5 per cent rate for Real Property Gains Tax (RPGT) for properties that are disposed after the sixth year. HBA added that it had in past lobbied the government to not change the RPGT rate for the first two properties, and to only increase the rate for the third property onwards. The reason is because most people can afford to buy two properties. One for own home and another for investment. It added, “By charging a RPGT rate for people who have held properties for six years or more, the PH government is effectively imposing tax on inflation, and this will be punishing genuine long-term investors.”

I personally think the government any more NGOs to educate the potential buyers that they do not need to push their affordability to the edge. If one is able to afford up to a RM500,000 property, there is really nothing wrong to buy a RM400,000 property instead. Two advantages for this move. Buyer gets to save more money instead of tying it all up into one property. A RM100,000 difference is RM500 savings per month. Over 5 years, this will become RM30,000.  Enough downpayment for an affordable home. Secondly, buyer would be adopting a more prudent home-buying move. On a longer term, say 5 years down the road, the owner would have saved enough for another property which could either be an upgrade or an investment property. Our former BNM governor said something
similar a few years ago too. Article here.

Happy understanding.

written on 4 Nov 2018

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Property price on a downtrend, right?

Do we see property price on a downtrend? We are talking about the (Malaysia House Price Index a.k.a MHPI) and we can base it on the property price movement trend for the last 10 years. (Chart as below) Before all the homeowners start to protest and reiterate that they will NOT sell their property for a lower price or all the buyers start questioning all the homeowners why did they refuse to reduce their asking price let’s understand that the MHPI is based on transacted prices. Please take a look at the image below.

Image source:
https://tradingeconomics.com/malaysia/housing-index

The price is not going down. The increase in property price is the one on a downtrend.

The chart shows that the INCREASE in property price continue to reduce over the years. For example, the increase in median property price in 2012 was double digits; 11-12% and as the property market continued to slowdown, the increase in property price starts moving down. In 2018, the increase in property price is close to 5% and there was even one quarter where the property price was actually negative! Based on latest quarter, the property price seems to have stayed close to zero. In other words, a stagnating property price.

What does this tell you about property price movement?

The trend is usually above zero. In other words, usually an increase. The reasons are not hard to see. Homeowners would not want to sell lower than the price they bought. The developers would do best to maintain or increase the selling price and when it becomes harder to sell, they may just throw in a renovation package or even furnishings instead of reducing the price. As for the buyers, well, they only want to push for lower prices until they got the property. After that, they would prefer for property prices to move upwards too.

Does this mean property price will never fall?

It’s incorrect to assume so. During the 1997/8 ASEAN financial crisis, property prices fell by double digits just within one year. This would be repeated when the next financial crisis returns. The reason is a simple one. As soon as there are many desperate sellers, then property prices could drop quickly. Everyone is trying to attract the few remaining brave buyers during a financial crisis and thus they would have to keep reducing their prices.

Staying focused is the key to ensure we did NOT overpay for any property

Property price needs to be compared and benchmarked against similar properties.  If there are many replacements, then the property price must not be higher than all these similar properties. Else, even if there was a big discount, we may still be paying a high price for the property. For example, RM500,000 high-rise within the city centre versus a RM500,000 landed property in the suburbs. If both are similar, then the choices become a personal preference.

Now imagine if the high-rise in the city centre is sold at 20% higher or RM600,000. Suddenly, the attractiveness of the landed home increases tremendously if the price difference is now RM100,000. Hope you understand that comparison need not just be with similar properties within the same neighbourhood. It’s always the availability and the affordability too. Happy understanding and happy choosing yeah.

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Property price plunge 2015, Malaysia.

‘Property price plunge 2015 Malaysia.’ This was the term people entered in google to find kopiandproperty.com Yes, I am serious. Haha.  Perhaps I should rename my blog into something to do with financial crisis prediction. The nearest I am to an economist with lots of experience is that I have taken many economics related modules during my degree and Master studies. However, based on my little knowledge and some rather complete reading of the many resources, I think the property price plunge 2015 in Malaysia is unlikely to happen.

Today, there are not that many speculators left in the market. Many do own more than a few properties but majority of these are still holding on. If they did not, it’s impossible for the market to still remain as it is today. Transactions has been going down, the desperate ones would have desperately letting o of their units. It has yet to happen. Oh yeah, a report in 2014 stated that 84% of all home loans are for borrowers with just one (1) property. Read here:
84% of homebuyers have only one (1) outstanding home loan.

Yes, the property buyers’ clubs are still around but unless I got to know that there are hundreds of them, I do not really fear them so much that I stopped viewing potential properties.

So yes, I seriously think unless the financial crisis hit again from external countries, Malaysia is not likely to start one ourselves. This is even if all three international rating agencies downgrade us to just BBB rating instead of the current ‘Investment Grade’ rating from all the three major rating agencies. If GST was postponed, then yes I think the likelihood is slightly higher. Thus, for those who are waiting for the prices to plunge, it would only be happening to the luxury ones. I term luxury ones as those selling for RM800psf or higher or minimum of RM1 million. Yes, like many I would definitely be happy if those more affordable RM300,000 units are ‘plunging’ 50 percent? Haha. Happy waiting for prices to plunge.

written on 7 June 2015

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Stop believing property price predictions. Start researching and understanding!

There are never ending predictions about the state of the property market. Especially when it comes to the property price predictions. There are predictions about property price increase which will make a lot of people happy and many people sad and there are also predictions about falling property prices which again will make many people happy and sad at the same time. To make things ever more interesting, the prediction can change totally within 12 months. Here’s one such prediction from an advanced property market. (not us Malaysia yeah)

Article in smh.com.au
 This was the consensus about the property market in Sydney and Melbourne real estate markets. It was predicted that there would be a deep and painful fall in home values and this would have shaved hundreds of thousands of dollars off the value of a median house. With this fall, some home owners would be forced into negative equity, where their debt is larger than the value of their asset.

This did not happen. Now, the predictions are totally different. ANZ now predicts home prices in Sydney and Melbourne will experience their strongest year since the 1980s and expected to rise 19 percent and 16 percent respectively.  Meanwhile The Sydney Morning Herald / The Age Scope Survey predicts Sydney property prices to grow 5.9 percent in 2021 and 4.5 percent in 2022. Meanwhile Melbourne prices will rise 4.5 percent in 2021 and 5 percent in 2022. Do read more details here:
Article in smh.com.au

Who do you believe then?

Think really carefully. Why do we need to believe all these predictions? Is it because we want to follow them? Well, if we did, then we would have been encouraged to sell our properties BEFORE the prices fall and if we did, then we are now looking at a big loss because we would have sold at a lower price and now if we want to believe property prices will be rebounding, we should buy a property? What if next year they predict property prices are going to fall again? It’s not even double whammy. It’s triple whammy! Haha.

How about researching and understanding then?

If someone is predicting a blanket kind of property price falling, then it has to be only be a crisis. Are we really in a financial crisis or is this a ‘lockdown’ induced negative sentiment? If someone is predicting property prices are falling, do we know if ALL areas would fall at the same percentage? Aren’t there any area which the price will remain strong and well supported by the owners who would not easily sell lower just because someone is predicting so?

What if it’s the other way? If someone is predicting that the price is going to move up, are they talking about some kind of economic revolution? Or are they talking about a rebound in consumption because people are no longer under lockdown? If they are saying prices will be moving upwards, then are they saying rising tide carries ALL boats? If they are, then better be very wary yeah. An unwanted area will still be an unfavourable area after the frenzy is gone…

Conclusion

Better believe what you found out versus simply listening to anyone yeah. If you know your neighbourhood very well, your prediction is likely to be way better than all these researchers in the bank who ARE not on the ground but are basically looking at just numbers, putting in another number and then announce the final results. Then, this result is shared by everyone,suddenly become viral and well, it may influence the market to react the way…for a while. Happy understanding.

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House prices under pressure… and bargains?

Want to know something which always happen whenever the stock market is down? Or since February 2020 when COVID-19 starts to become so serious that Malaysia has our Movement Control Order (MCO)? Yes, when all these bad news happen, then there will be the potential for property prices to drop. When we really think a little deeper, these situations do not compel any homeowner to suddenly wish to sell their property at a lower price yeah. Well, except for the more desperate ones who would have sold at a lower price anyway whether or not there’s a crisis.

Then, why do stock market or COVID-19 affect property prices then? Well, it will affect businesses and businesses employ people. I hope everyone see the link now. When people lose jobs, of course they will face some difficulties, so they will be more willing to sell their properties at a lower price, especially if faced with cash buyers. Here are what some prominent people in Malaysia are saying about house prices yeah.

Article in edgeprop.my
 Savills Malaysia managing director Datuk Paul Khong says that there may be bargains for Malaysian homebuyers with the property market affected negatively by the current COVID-19 outbreak. He said, “No major property transactions are expected during the period and the property sector is expected to take a hit together with all other sectors.” He also expects more properties to be put up for auction in the near future.

Real Estate and Housing Developers Association Malaysia (Rehda) president Datuk Soam Heng Choon says that currently, there is no notable change in property prices, but property sales is close to a standstill during the MCO period. He said, “If the pandemic effect is prolonged, eventually the developers will have to readjust their selling prices for the sake of cash flow, as the more important thing is to survive.” Soam however believes that after the MCO is over, sales will slowly return. Please do read the full views of these two distinguished gentleman in
Article in edgeprop.my

More auctions, I think is quite likely. Not just because there are slightly more units for auction because of financially troubled buyers but also because properties are usually not sold within the first few auctions these days. Thus, we may see more auction events but actually it may be for the same property for the 5th time… Yes, I am a licensed auctioneer and I conduct Land Office, High Court and bank auctions too.

I would like to say that I agree with Datuk Soam about sales returning after the MCO. I do think that when things return to normalcy, the developers should be able to sell their properties. This is true as long as they (developers) are building what the people wanted but could not sell it currently because no one is viewing and decisions to buy take longer than usual due to the many uncertainties yeah. Happy following and please stay at home unless truly necessary to go out for grocery.

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Property price rising faster than salary growth

Salary increment versus property price growth

Every year, most people receive a salary increment. Probably, 5 percent or thereabouts. If property price rises by a smaller percentage, then property prices become more affordable with every passing year. If the property price rises by a bigger percentage than salary increments, then property becomes less affordable with every passing year.

Measuring property affordability

One way to measure the affordability of property price is using median salary versus median property price. For example, if meadian yearly salary is RM50,000 and the median property price is RM300,000 we say that the property price is 6x earnings.  Calculation wise, it’s RM300,000 divided by RM50,000 and this gives a multiple of 6x. The higher means the worse and the lower means the better.

What happens if the property affordability rises suddenly from 7.9 times earnings to 9.1 times within one year? Do read about it.

Article in theguardian.com
   The Office for National Statistics (ONS) said house prices grew faster than earnings in 91% of local authority districts in 2021. In England, a home cost an average of 9.1 times earnings and this was 7.9 times in 2020.

This meant that house prices increase was faster than wage growth in more than 90 percent of England and Wales in 2021. In England, the home cost used to be a multiple of 3.5 times earnings in 1997. In 2021, it’s now 9.1 times.

There are however areas where affordability had “significantly improved.” For example, in the two priciest; the City of London and Westminster. The house prices to earnings ratio fell to 18.9 times earnings. In 2018 it was almost 25.

Kensington and Chelsea remained the least affordable local authority area in England and Wales, with average house prices estimated at 36.5 times the typical annual wage.

Price was not the only issue. The ONS also issued a report stating that private rents paid by tenants in the UK rose by an average of 2.3% in the 12 months to February. However, in January the property website Rightmove said private rents in Britain were rising fastest on record, with the average advertised cost outside London 9.9% higher than a year ago. Please do read the full article for a lot more details:
Article in theguardian.com

Note the rental, not just the prices

When property prices rise, the rental would follow. The reason is a simple one. When prices rise, the monthly repayment will rise too. When owners rent the home out, they would have to rent it at a higher rental. Else, they will not be able to cover their monthly repayment or worse still, having to subsidise a much bigger amount if the rental could not cover the monthly repayment in the first place.

This is why renting is not the best option because rental do rises too when property prices rise. Somehow everyone needs a roof over their head and market situation will not be kind to the ones who have less negotiation power. There are countries where legislations have to be put up to ensure home rental does not rise beyond a certain percentage every year. Read here:
Rental increase NOT more than 5 percent per year, okay?

Happy understanding that Malaysia is not the only place where people claim property prices are becoming unaffordable or that renting is better than buying.

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Malaysia’s property prices should continue rising

Whenever anyone tells me that the property market of Malaysia is entering a bubble stage and it should burst in the future, I always tell them that there is definitely such a possibility. However, Malaysia’s property market should not be the first to burst when we look at the availability affordable homes versus the very high priced homes certain locations. In fact I am not sure if I want to even rate it within the first few. Today, there are way too many countries in the world today, including the developed ones where there are not many choices. In terms of understanding some key elements for property bubble, take a look here:
Spotting signs of a property bubble, 3 points (updated)

Speaking about the Malaysian property market, I just read a very interesting article by
James Chow of propchat.org
  Using available numbers, he showed property prices in Malaysia in comparison to the average salaries of a working person in Malaysia. I think he did a lot more research and included many other more prominent property markets of the world today. His analysis showed that Malaysia is still considered fine when compared to many other countries. One interesting fact that he showed is that Perth seems to be the best place to earn money and own a property! Yes, I have been to Perth and like it too but Malaysia will always be where I will be. You can refer to his full article here:
Malaysia Property Prices continue to increase

The answer is a clear YES if we are asking if the property prices would continue to rise. Assuming Malaysia is many years behind any developed country, we can already see the property price possibility. Read here:
Hard for property prices to go down lah…

The answer is NO if we are asking if since prices would keep rising, can I simply buy some property. In a discussion with another fellow investor a few days ago, I told her that there isn such thing as a perfect property decision. She was asking if she should wait for a better price for her condo before selling. She wanted to upgrade to a landed property. Well, what if the landed property price rises faster than her condo?

Moody’s has announced just days ago that the rating outlook for Malaysia is now at stable instead of positive. Does this mean that property prices are about to drop? Quickly identify some properties we want to buy. Keep tracking it and if the property prices should drop, quickly buy one. Think longer and it would soon exceed its prices today. Saving is not going to be faster. Imagine trying to save RM10,000 per year. It’s near impossible for majority of the working class Malaysians. Yet, a RM400,000 property, rising just 2.5% per year is already RM10,000 up every year! Remember to read the informative article by
James Chow of propchat.org
  Happy learning and remember, property prices will continue rising even if there are always hiccups along the way.

written on 13 Jan 2016

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Property price rising very slowly in Q1 versus previous quarter.

2.8 percent sounds alright for me

As a property owner, I am very happy if the property price rises by 0.7 percent every quarter or 2.8 percent per year. Let me illustrate why with a RM500,000 property. By the way, I do not know many people who bought a property with cash except for one buyer who bought my condo many years ago. The majority pays 10 percent to start telling the world they are a property investor. That’s around RM50,000 to earn the benefits from a property price increase which is based on the full property price and NOT based on the downpayment we paid.

Anyway, RM500,000 property with 2.8 percent increase per year is RM14,000 per year.

Earn RM14,000 via Fixed Deposit?

If we want to earn this RM14,000 in the bank via Fixed Deposit which rate is at 2% currently, then we need to have RM700,000 in the bank in the first place. Please remember, this RM700,000 is a must-have amount. Not just the 10 percent deposit like how a property investment usually is.

Now property price is rising super slowly in Singapore; for Q1 2022.
Article in themalaysianreserve.com
   Property prices climbed 0.7 percent in Q1 2022 versus the previous 3 months when it was a 5 percent jump. This is based on Urban Redevelopment Authority data. This is the slowest for the last 2 years and only Q2 2020 was lower at 0.3 percent. I am very sure everyone remembers why Q2 2020 was a quarter to be forgotten.

The sudden slowodnw is because the government installed property curbs in December. Some foreign banks have suspended fixed-rate home loan packages and this has made the deals less attractive to lenders. Nicholas Mak, the Singapore-based head of research at APAC Realty Ltd. unit ERAsaid, “The property curbs may cool the market in the short term but not so much in the long haul.” Do read the full article here:
Article in themalaysianreserve.com

Just need to remember, curbs can only curb…

When the property market is slow, the government will try to boost the total transactions. One of the steps they do is via the banks; increase interest rates to deter some potential buyers. However, please note that lowering property transactions has no direct influence on property prices. That depends on actual demand and supply on the ground. Certain areas do better, certain areas not so good etc.

If I am an owner, I am not selling my property at a price lower than what I thought it should sell just because the government moved the interest rate. Unless of course I am financially challanged, then I would sell lower and that has again nothing to do with lower or higher interest rates too.

Property will always be a need

Some people got married and forced to buy a home versus renting a room. Some people got a new baby and had to buy a bigger unit than the small unit the couple were staying. Some people needed to ensure there’s a room for the grandparents and some people changed job and had to buy a new place which is nearer to the new office. Oh yeah, some people get to work from home and now could buy a new place further away from the office so that she could have more space! All these are the demand for property.

Inflation creeps in as usual

If one were to ask me if the value of the property is now higher, my answer is it really depends. However property prices wise, yes, it’s just going to get higher because of inflation. When the price of raw materials go up, the price of that bowl of noodle goes up, that rental for the shop goes up, that barber would need to charge higher, the car prices move up and well when everything is showing upward movement, then we know that inflation has started to creep in and the property price would also slowly move upwards.

Happy understanding and by the way, I seriously do not want property prices to be rising by double digits every year. That’s the road to a crash further down the road. By the way, Singapore property market is an advanced market. What happens there may happen in developing property markets in the near future too. Cheers.

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Property price rising for affordable housing (usually government related), possible?

Would prices of affordable homes rise? This question has been asked a few times. Briefly, the answer is Yes. Not so much of that attractiveness of such affordable homes but also because of the future demand and supply of similar properties and the cost of building such similar homes which would have also risen. Whether it’s the cost of land, the salaries paid or even the cost of materials etc, it would have gone higher and this would thus meant future similar homes will have to be priced higher and the current price we paid for affordable homes would rise in tandem.

Note though that if land prices kept going down, people get paid lower salaries and the cost of building materials kept going down, then of course in future, the property price would keep dropping too. Objectively and looking at all the advanced property markets in the world today? Unlikely to happen. As for an actual comparison of prices then and now for affordable homes, this is the market where majority of all the affordable homes are provided for by the government.

Article in theedgesingapore.com
 There are a record number of million-dollar price tags for Singapore’s public housing. This seems to be happening in property markets from Hong Kong to Toronto. There were twenty three resold government-subsidized flats which were transacted for at least S$1 million in February according to data from real estate portal SRX Property. looking at 2021, thirty-six of such transactions have happened thus far. This is 350% increase versus the same period a year ago.

There are a lot more details, read it in
Article in theedgesingapore.com

Let’s be objective here.

I have been to my close friend’s HDB home in Singapore and stayed there on many occasions. The environment around the development is clean, pleasant, bright and airy. Without them telling me that this is public housing, you would not have guessed that it is public housing. What this tells us is that when the development is well planned, then the property would continue to be in demand and with every passing year, the prices would slowly inch upwards.

This is why IF the affordable homes built here in Malaysia have the same traits (choose carefully because NOT everything is equal just because the price is similar), then the prices for these affordable homes would also be up and it would not stay the same as when you bought it 5 years ago. Hopefully now we stay focused on the reasons to buy and do due diligence versus having the thought that affordable home prices will stay the same 5 years or more down the road. Happy viewing and deciding.

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Property price rose 10.1% in 2021 for this developed property market.

Nope, not Malaysia yeah. We probably have a positive number too for the whole of 2021 in terms of property price increase but unlikely to be anywhere near some of these advanced property markets which seem to be immune to the Covid-19 situation.

I just wrote this recently.
Property prices rising at fastest pace in 17 years?
. I always wonder what’s the difference between the Covid-19 situation over there in the UK versus here in Malaysia. The sentiment seems positive despite the number of cases as below. So, perhaps they are a developed property market? Where the buyers know that they need to look further ahead versus being influenced by the short-term situation?

Data as at 7th February 2022 from
https://www.worldometers.info/coronavirus/

Now let’s look at another developed property market. Mature property market which is also considered a safe haven for property here in South East Asia.

Article in cnbc.com
  Singapore property prices are set to keep climbing in 2022, but at a slower pace.  Private home prices increased 10.6% in 2021 and is expected to rise further in 2022 by between 1% – 4% according to real estate agencies Knight Frank and JLL.  Other reasons supporting the price increase include lower interest rates, limited supply and strong demand.

Due to the price increase, Singapore has introduced new measures in mid December 2021 which included higher taxes on second and subsequent purchases and tighter limits on loans. Please do read the full article here:
Article in cnbc.com

With cooling measures…

With cooling measures, the government is definitely aiming at reducing the demand for properties and thus this will reduce the number of transactions and even delay some purchases when people saw that just paying the taxes alone would be substantial. They may not want to pay those extra taxes. Perhaps can use some of the funds to go travelling instead?

Accommodative for growth versus worried about inflation

In Malaysia, Bank Negara Malaysia is looking at being accommodative to growth first versus being too worried about the effects from potential inflation.
Interest rates will rise in H2 2022. Let’s be ready and be happy too.
 Just need to note that interest rates may rise in the second half in order to dampen inflation which is not a good thing as it will make it more expensive for everyone to buy anything including property.

Happy learning.

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Falling lower? Not low enough yet.

According to a survey by PropertyGuru, the leading property website in Singapore, 60% of Singaporeans still think prices are too high in Singapore. This is despite the fact that the prices has been falling throughout 2014. Demand is intact however. Majority will enter as soon as the price hits their expectations. They want the Singaporean government to keep the cooling measures too. This happen to be the major cause for price decline thus far. Of course some of the reasons why they also feel so was also because of one external ranking which has ranked Singapore the most expensive city in 2014. Yes, ahead of Tokyo, New York or even Shanghai. Funny thing is, I agree. In both my visits to Tokyo, the hotel prices were really cheaper than Singapore! Yes, I am talking about the 2-3 star types plus the location. I went to Singapore 6 times in 2014, thus my information is quite current.

Coming back to expectations. I seriously do not believe anyone would think that prices are cheap even if it continues to decline in 2015. PropertyGuru said that private home prices would drop a further 5-8 percent in 2015 while that of HDB, another 4-6 percent. Then, it said the developers would have to gradually adjust their prices so their projects are more affordable. For Singapore, this would only be by building more units on the same piece of land because the margin for the developers are nowhere near their Malaysian counterparts. Main reason is land price.

Personally, I think the survey has just shown that whether it’s Singapore or Malaysia or elsewhere, it’s always about sentiment and affordability. When sentiment is very positive, people will somehow stretch that ‘affordability’ up a few notches. When sentiment is negative, they would not just complain but they would also just stand and watch. For 2015, any positive sentiment would have to come from China or at least begin with them. Without a recovering China and the current situation of ever stronger US$, there’s no such thing as a change in sentiment. Thus, I think the next survey by PropertyGuru in Singapore would still show the same two conclusions. Price too high and buyers would only buy when they feel price has become reasonable again. Final question, what’s considered reasonable? Seriously, would the Singaporean government wants the prices to drop to levels of 5 years ago?

written on Jan 22,  2015

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