It is a personal opinion that supply is still way below the potential demand when it comes to property, especially within Greater Kuala Lumpur. Thus the number of unsold properties being bandied about has been incorrectly labelled as an “oversupply”.
Just look at Greater Kuala Lumpur’s population, for example. It is growing by a few hundred thousand every year.
Urbanisation has remained strong and KL was ranked 11 in the world among cities exhibiting the strongest economic clout by PwC’s 2016 Cities of Opportunity Index.
Economic clout or growth can only happen when there’s a bigger population.
It seems however that the working population in KL – the M40s and the B40s -are facing difficulties when it comes to buying property.
According to an article in EdgeProp.my, the reason is because the average house price is above both groups’ range of affordability.
Within the article CGS-CIMB Research said that where property stocks are concerned, some have fallen from their peak valuations in 2014 and some down to their lowest levels in 2008.
This means that share prices are now attractively priced. They continue to expect property companies in their coverage to show positive earnings growth. They also shared this important observation.
Housing loan growth is likely to be limited because of the existing environment of low interest rates, limited buyer’s affordability and possible interest rate hike.
Restrictive government policies are still in place (current cooling measures and recent Budget 2019).
Thus, they do not see buyers having the incentive to purchase property given the weak rental market and subdued property market. They expect the housing market to remain challenging in the near term.
This will not change unless there is a meaningful surge in household income, decline in house prices or more positive measures introduced.
Property prices have to come down or income has to rise. This is the usual view.
Beyond these however, some potential buyers have to manage their expenses better.
Perhaps moving forward they can because smartphone sales have peaked according to some reports, which may mean people will use their smartphones for a longer period since there are no new super-duper features coming up.
This is the time when buyers can get their best property at a lower price as developers will be much more willing to tweak their margins too.
However, if the buyer continues to miss this opportunity, then in the near future, we will continue to have the “house price too expensive” situation.
This article first appeared in kopiandproperty.com
Charles Tan blogs at property investment site kopiandproperty. He dislikes property speculators and disagrees that renting is better than buying. He thinks it’s either property or poverty. He is presently the CEO of an auction house auctioning assets beyond just properties.