In an uneven property market, how will Malaysian real estate sector perform this year?
It is important to remember that the property market is all about supply and demand. On the supply side, the government is continuing to boost house building across the country especially with affordable housing, and recent output figures from the construction sector reflect this. Just to recap, of the 126,000 units proposed in 2013, only about 10,000 commenced construction in 2014. To reach the earlier set goal, commencement of affordable homes construction in 2015 will need to be stepped up to 120,000, failing which, the actual number of affordable homes constructed may fall far below target.
Affordability is a key discussion in 2014 and years to come. For me personally, properties are only affordable to some people but not to others and the gaps are widening. For first time home buyers, houses are always not affordable. I remember paying RM90.000 for my first property with 30 years loan and totally have no idea how I am going to pay my monthly instalment.
As we all know, house prices tend to rise when stock is low. With more houses being built, particularly in the lower end of the housing market, this could also have an effect on our house prices. The main driver for price market price growth in recent years has indeed been the consistent shortage of good quality housing product in highly sought-after locations.
2015 will see a price growth especially in 1 suburban area. Even though Malaysia property has not gone through the roof, some of the suburban area or fringe suburbs in Klang Valley has experienced 307o appreciation in less than two years. In my opinion, properties in prime area are not the best investment. They used to be – before they became prime. A property in an area that is prime will come at a premium price, have low relative rental yields (mostly negative cash flow for three to five years) and will likely have its best period of growth behind it! Yes, it will continue to grow, but as an investor your goal should be to buy property in an area that has the capacity to become a future prime area, and to buy it before it takes off. Then, its greatest period of growth will occur while you own it.
Generally, the sentiment or drive for real estate investment is still strong in Malaysia. This is evident in our annual PRISM event where we registered more than 3,000 participants. Loan growth for banks in Malaysia was at 10.6% in 2013, and for 2014 we should be recording 9.8% growth with residential mortgage taking the lead.
Relatively low interest rates are driving a lot of property investor activities, and the prediction for 2015 is that there won’t be a lot of fluctuation in our Base Rate. Suburbs together with growing infrastructure, pleasant amenities and easier transport access with average prices around RM500.000 to RM600.000 are generally more prone to experience price appreciation than suburbs together with medians value round the RM1.2 million cap.
2015 will be a very fragmented market. Nevertheless, with Malaysia stable economy, growing population and relatively low interest, how bad could our property market be? I always believe property investment is medium to long term investment. However, for speculators who always go after ‘The Flavor of The Month’ where fundamentals exceeded, some cautions must be exercised.
For more Malaysia property news, please visit www.malaysiapropertyiskandar.com .