Why is Malaysia’s property market not suffering from recession?
Some of my friends have been on the lookout for new and old properties for the past few months, hoping that the price of the property market would drop due to the recession. Unfortunately, nearly all of them came back to me and voiced out their disappointment. Rather than seeing a price drop, they are actually seeing a price increase for most properties.
This actually confused most of them because the overall property market is SUPPOSED to drop by 10-20% this year.
Well, there are properties which drop around 10-20% this year, but those are located in selected areas only. Anyway, let’s take a look at some of the reasons why our property market is not going to see a decrease in price this year or next (if there is any, it won’t be much).
Marketing move
Most of our local property developers are pretty good in marketing especially the big ones like Sime and SP Setia. They’ve came out with plans like the 5/95 plan, the Sime Darby Property Parade of Homes, etc. All these smart marketing moves actually give the buyers more confidence, lower entry point (low downpayment) and an opportunity for first time home owner to buy a home during times like this. Imagine if everyone is required to pay 10% upfront for a 350k property. The demand will go down, and the price of the property will also go down due to lack of demand.
No new launch
If you notice, most property developers are only working on previous project launches. There are not many new launch nowadays. This is because most developers prefer to delay some of their important project launches due to the recession. They prefer to wait till the storm is over. On the other hand, there are also developers which go for the built-and-sell model. This actually gives them time to build the property while waiting for the economy to stabilize, and built-and-sell model normally demands a higher price tag for its units.
Rich developers
Okay, let’s face it. We have a lot of rich developers in Malaysia. They are willing to postpone the launching of their projects. That is why you can still see some empty lands in prime areas. By postponing the launch, the supply will decrease and this will actually prevent the price from dropping too much.
Demand is there
The demand for properties is still there even during recession. A lot of people are moving in to the big cities from the small ones and there are also some foreign investors, and foreigners who are making Malaysia their second home. On the other hand, I also notice that there are a lot of people getting married this year. Some did that last year. So it’s not really a big surprise for the newly-weds to hunt for their first home. Oh, and the low interest rate certain helps! All these generate a strong demand for properties. And when demand is still strong but the supply is lesser, the price will go up.
Malaysia is not as badly hit
Malaysia is not as badly hit as the likes of US and UK. Our Central Bank has been doing a very good job in keeping everything under control. True, there are still jobless people out there but again, I must say it is not as bad as we first feared it would be. Also, those who are looking for properties are actually not the typical property investors (most of them anyway). They are looking for properties for their own stay. Property investors can always postpone their purchase to a later date, but for this group of people (looking for own stay), buying now is the same with buying later.
Government
There have been moves by our government to help the property market. For example, the stamp duty exemption. This move actually helps to promote the purchase of low to medium cost properties for the first time buyer. A good move by the government for the low and middle income group to own their first home, but not so useful for the property investors. Still, it doesn’t take away the fact that this move DOES generate some demand.
Again, I must stress that I am not an expert. All the above points are based on the research which I’ve done for my friends.
Anyway, if you are a first time home buyer, this is actually a good time to look for one because I doubt there will be any decrease in price anytime soon. Just remember to choose your housing loan properly. Also, pay attention to some of the auctions organized by banks, and also on the secondary market (there could be some bargains there).
And I do feel that our property price will go up and not down. Unless you’re talking about areas where the supply far outnumbers the demand – Mont Kiara and KLCC area.
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