Why Malaysian Still Struggling To Buy Property

Lower Prices but Market Remains Lukewarm

The past two months has been a time of rapid adjustment for many Malaysians as they endured a string of price increase following the implementation of the GST. News of rising cost of living and even errand traders caught in profiteering acts continue to make the news. In these times of blanket price increase, the real estate prices seem to have bucked the trend with downward adjustments.

Normally, the price adjustment should have been a good sign for many Malaysians whom had to deal with rapidly escalating prices of the past couple of years. However, few cheers can be heard as people continue to sit on the side lines despite the clear bargain.

There are many reasons for the phenomena; uncertainties in the global economy, depreciating ringgit, lack of confidence in the market, etc. But the biggest reason is simply because many everyday Malaysians simply cannot get a mortgage as loan rejection rate hit the stratosphere.

Cooling Measures Continue to Exert Influence

The current lackluster performance and high loan rejection rate can be traced back to the property cooling measures that government has put in place since 2013. The cooling measures were in response to the property boom from 2010 to 2012 where national price average rose from RM 138,711 in year 2000 to RM 231,369 in 2012.

The reason these cooling measures has been so effective is because they target different areas such as taxation, bank loan requirement, etc. These factors have a compounding effect and resulted in this market disparity we see today. We can look at the market from different angles to better understand how the market will change in the near future.

Fundamental Demand Still Persists

The first thing to understand is that the cooling measures have effectively put many short-term investors and speculators out of the picture as the market is no longer in their favour. What this has done is to filter down the current market to those looking to buy for own stay.

With real demand to prop up the market, it is unlikely that the market will experience a bubble as the lackluster performance is not due to oversupply. That being said, the risk adversity of banks has resulted in a high loan rejection rate that is putting a huge damper on the transaction, More need to be done to address the issue and potential property buyers would be better served by properly strategizing their mortgage application to increase the chances of securing a loan.

As mentioned numerous times throughout the years, while the percentage increase in property prices might dominate the headline, potential buyers must be aware that absolute prices in Malaysia is still significantly lower when compared to the regional markets.

Despite price appreciation of some 40% in the past five years, Malaysia is ranked only 99 globally in terms of property prices and trails by a wide margin other Asian cities such as Hong Kong, Singapore, Tokyo, etc. What this suggests is that there are further rooms for growth in property prices as prices in Malaysia play catch up to regional standards.

What all these seem to suggest is that the nation is facing a case of chilled property prices that are caused by external policy factors. The fact that many young Malaysians are still actively on the lookout for properties is definite sign of a strong demand, but there is no denying that the disparity between want and ability to purchase is turning out to be a significant huddle.

Value for Money Houses On the Rise It is interesting to note that the increase in construction prices has not led to similar increase in property prices and this seems to suggest that properties are getting as close to being value-for-money. This is due largely by the developers adopting different pricing strategies to cope with the market sentiments. With developers thinning their profit margins, people shopping for new launches might really be able to stretch their ringgit,

The market will be expected to continue to adopt a wait-and-see attitude to the end of the year as the market settles and changes in the regional economy becomes clearer, Perhaps it is time for the government and banks to relax their grip a little so as to inject life into the market. For more Iskandar Johor Bahru Properties , please visit our website.