Malaysia property market prices have shot through the roof quite significantly over the last couple of years, more than ever in major cities like Kuala Lumpur, Penang and JB. I believe so as investors, speculators and developers worked hand-in-hand to cause the frenzy which reflected in prices which have almost doubled in most places. Thus, the ownership of private property was out of reach of most fresh graduates establishing out in life.
Malaysia property seems to be one of the world’s most lucrative opportunities when it comes to investing in property and real estate. Whatever the situation be, according to the poll conducted by Malaysian property consultants, the circumstances of Malaysians is quite surprising though. If Europe and America are suffering from recession and struggling to climb up the ladder back to restoration, the scenario here is that, Malaysians have become richer than ever to invest their money in property and other lucrative business investment options despite the unrealistic, escalating cost of property? How can that be possible? Each time I come across a notice at public places or property for sale advert on newspaper, I would be left dumbfounded with the cost of property stated in bold figures; millions of value which sounds like a reasonable price. You can’t find a property with a decently reasonable price these days when you flick through the property sections in papers? It’s close to impossible. The first thing that struck my mind will be, does the property worth that value? It’s a bizarre phenomenon these days.
This perturbing apprehension has been running in circles in my mind for quite some time. Each time, when dad and I enjoy our day off after work in our living room, this topic will definitely pop up in midst of coffee break. My dad will strike a chord with a profound reminder that times are changing and it’s going to get tougher for my generation and years to come, it will affect the future generation. I understand where is coming from. As a government staff, he managed effectively to give us a quality life with all the necessities without disappointing us in any bit although he was the sole breadwinner of the family (Not to forget my mom is a wonderful housewife). It’s beyond our imagination but this is a terrifying picture but of the ultimate truth.
About 20 years ago, the population was 3 million but now it has reached at 5 million, an increase of 40%. Needless to say, property values follow the suit (The property price index has jumped from 33.3 points [1980] to 202.8 points [2010]). According to some studies, data shows that from 1990 to 2008, private home prices tripled, while household incomes only doubled. In a nutshell, this means private homes were significantly less affordable now than 20 years ago, since the rise in home prices had surpassed income growth by 50%.
For how long more can we see prices rocketing in Malaysia? House and apartment are being so pricey which slips out of the reach of many working and even middleclass Malaysians. Just yesterday, over my dinner date with my besties (Often this is a means to catch up with ourselves from time to time), we chatted about every other thing and finally ended up with the current dilemma that we all are hooked up with despite being in an established career for several years since we graduated. It looks like it’s not only me experiencing such impasse, but most of my friends and working colleagues too. Indisputably, it is very challenging for young working adults like us to invest in any residential property per say. These property speculators are not thinking about everyone. They are driving up the prices with their activities and making a neat profit, but they forget that someday their own children might not be able to afford houses of their own in the future, if prices continue to rise like this. The augmentation of this market has created an exploratory enthusiasm among many owners to make a quick profit in short span. It has been a trend to purchase house from the developer and later sell their homes for a profit and buy another on downturns. This is the cycle that has been going on for years.
Most property investment analysts concur that real estate blow-up is coming soon; possibly it could happen as early as 2012 or 2013. I had been keeping a regular tab on the property news every now and then, (inquisitive about getting my own property soon) expecting for a property crash soon which seem like wolf and sheep story. Although there have been growing concerns that the rising property prices is a bubble waiting to explode, the Malaysian government doesn't seem to think so which shatters the hopes of many. I can recall what my dad told me about the property crash of 1998? It only fully recovered after 12 years. History would repeat itself. It happened in the 1990s and would happen again or I believe so. But the question is when will it be?
Inevitably, purchasing of private homes will be a difficult feat for most of the young generation. For now, if the buying and selling continues, with the exorbitant prices awaiting any further government action, “what will then be the fate of the man on the street?” Maybe some of us can still bask in the temporary comfort of intriguing housing loan schemes like the innovative 5:95 (i.e. 5% down-payment and 95% loan) loan package and low interest rates of up to BLR-2%, mortgage repayment is increasingly taking up a bigger chunk of the average Malaysian's salary. Some 30 years ago it was possible to settle the housing loans within 10 years without asphyxiating ourselves. But is this still doable for today's borrowers? It is so dreadful to have loan tenures stretching 30 years or more! OMG! The kind of expression you get is” what the heck with repayment of the loan the entire working life? Do you think it is not too far-fetched to stretch your loan across 2 generation? One should not overlook that the average salary in Malaysia is only RM1500 a month and only a mere 15% of the population pays income tax, based on 2010 statistics.
I can vouch that till today, it is quite impossible for one to find a decent landed house for RM300, 000 in KL city. Can you believe that a house of more than 30 yrs old still fetch the price of a goldmine in KL? The reality start to hit me when I began to realize that even a decent 1,000 square feet private apartment located 10km away from the city centre would already cost that much. The only suitable example that rings a bell will be YTL's Sentul East developments like The Tamarind and The Saffron. These 2 residential properties were located in once upon a time stigma-afflicted area which is only a mere 15 minutes drive from the city with all the convenience. During its launch in 2008, the 1,000 sq ft units at The Saffron were sold between RM200,000 to RM300,000 but today, the prices is exorbitantly high which is at RM400,000 to RM500,000 - that's a rise of almost 100% in less than 3 years! Sentul East is so near to my housing area which I used to travel on that route to KL city regularly. Back in the 1990s, the place was underdeveloped and people hesitate to purchase a property there due to the stigma it possessed for a very very long time. People are willing to pay a premium price even considering that Sentul was once perceived as a "ghetto". But since YTL took over the place, Sentul was breathed into a sense of exclusiveness; where everyone is dying to get a hold of a place of their own here.
Even when the properties come with such exclusive tag, there were still buyers to grab it like hot cakes! How can they afford such overpriced properties? In fact, during one recent launch of The Amara in Batu Caves on March 2011, all the units were snapped up during the weekend despite having a per sq ft price of RM600 . A check on IProperty.com.my, one of Malaysia leading property classifieds, will confirm the overpriced prices of residential property in hotspots like the area surrounding KLCC, Damansara, Mont Kiara, Petaling Jaya, Duta and KL Sentral
Looking back at why such scenario taking place here is that , some entrepreneur purchase property for the sole intention of snatching chunk of profits in short span. According to some buzz, there are also companies from Mainland China that have taken advantage of the easy credit back home and come to Malaysia to purchase tens of units of private apartments at one go, preventing genuine buyers from getting them at more reasonable launch prices ( I got this from one of the real estate news bulletin). Besides, property developers are becoming insatiable to grab more profits by building deluxe condo units and also bungalows units for the elite class and foreigners. This is an obsession to rake in maximum profit out of each square feet of land from the rich parties. The upshot of flourishing real estate business is a collaborative effort and mutual understanding among property developers, banks (who lend more money and for longer tenures of up to 35 yrs), and support service providers (real estate agents, valuers and lawyers) whom are here to fill up their pockets with big bucks.
It takes a real concern for me to pen down this pressing issue which I believe is just not my own quandary alone. But I’m sure I’m speaking on behalf of many of us. I can feel the nod I will be getting for expressing this apprehension. My advice to the rest of the young working adults like me, I guess it’s valuable to invest on properties rather than getting the elite cars to show off em’( unless you’ve too much of cash flowing in). You buy a car today, and the value depreciates tomorrow. On top of it, you don’t live in a car for the rest of your life (or perhaps someday, we might end up being a gypsy or travelers whom live in their motor homes when ownership of property is beyond our reach! He,he,he). Just bear in mind that, while cars lose value the minute you drive them off the showroom, property is a good inflation hedge, appreciates in the long run and is something that you can pass on to your children.
I think it would be apt to end my article here with queries to ponder: “What do you think?” “Is the party over for the speculators?” “Will the bubble burst anytime soon or is it going to reach a plateau and slide or rise gradually?” With that note, I’m signing off :)
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