Now Malaysian speculators snap up properties in London

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An informed source has revealed to me that at one upmarket seafront apartment suites complex in northern Penang Island, the actual occupancy rate is just 10 per cent, even though the apartments have been sold out.

Contrary to popular belief that much of the property speculation/investment in high-end properties in Penang is by foreigners, the rough breakdown by nationality of owners of these particular apartments is as follows:

  • Malaysians based in the country (60 per cent),
  • Malaysians residing/working abroad (20 per cent), and
  • foreigners/others (20 per cent).

Some of the foreigners renting these apartments have moved out to find newer, more modern apartments in Penang, said the source.

Perhaps many locals have snapped up properties in Penang because of low bank interest rates and the fear that property prices are surging beyond reach. There is also the desire to buy property as a hedge against inflation.

But this ‘articificial’ surge in demand is in turn fuelling the bubble.

This is a phenomenon that is not peculiar to Malaysia. London too has experienced a sharp rise in property prices, a lot of it fuelled by panic buying in the belief that property prices are surging beyond the reach of its residents. This is happening amidst concern that there is not enough affordable housing. The vast majority of the buyers are UK nationals, contrary to the perception that the people driving up prices are super-rich foreigners (though some of them are foreigners resident in the UK).

Read this article in The Guardian and you will see the similarities with Penang, KL and JB are uncanny:

Londoners themselves are probably part of the reason prices continue to soar. One housing market expert suspects that what he calls “this crazy boom” is being further fuelled by a kind of panic-buying among people with savings, wealthy relatives or equity in existing homes who fear that the market is spiraling beyond their means forever. He predicts that this now-or-never part of the “feeding frenzy” will continue until everyone who can get their hands on the necessary cash has sunk it into their pile of bricks and mortar.

In the midst of this are the foreigners who are also buying property in London. Who are they? Surprise, surprise, two third of new London homes sold before completion have been bought by South-East Asians. One third of these are from Singapore, another third from other South-East Asian countries countries including Malaysia and Thailand, and the remaining third from Hong Kong – probably due to recent curbs on property speculation in these countries. So now they are venturing to London!

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Yes, it seems that the property market in Malaysia is cooling down a little, with Bank Negara curbs on the length of housing loans, a hike in Real Property Gains Tax and an end to the Developer Interest Bearing Scheme, which allows developers to bear part of the interest costs.

In the Iskandar Region in Johor, a new measure barring foreigners from buying property below RM1m plus a 2 per cent levy might curb demand for homes costing between RM0.5m to RM1m. But will this merely result in developers now building properties above the RM1m threshold – and dragging up all other property prices as well? This was our experience in Penang, wasn’t it?

Thanks to blog regular Sharyn for the Bloomberg link.

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20 COMMENTS

  1. You can’t clap with a single hand. Big croc speculator and developer cannot create bubble without the typical Joe public join the speculation frenzy, together with BNM that encourage lenient credit that “heat up the market”. Human just refuse to learn mistake from history, the 97/98 crash . When all big player long left the market, Bolehan central bank still keep injecting (AKA printing money) to fuel the bubble. This is little different than pyramid scheme, the last fries will take the full impact.

    For the “newly launch” property, developer create an artificial “short supply” by “storing” 30%~50% of the property while only release remaining to the normal buyer and claim “all sold out”. However, this will not happen without DIRT CHEAP interest fees given to developer by the bank.

    So it is bubble in every end, whether buyer or developer, there is huge bubbles everywhere, betting on the continuous USA QE dirt cheap hot money that “hopefully” will offset Malaysia production deficiency.

    Back to the fundamental, Malaysia is pretty close to 98 bubbles. But who cares.

  2. If you analyse it further, besides the easy home loan financing (Prior to new RPGT ruling), fear of scarcity syndrome & artificial demands (can be herd mentality speculation & developers’ “insider trading” before official launching & sub sales), the trends of property development is more skewed towards building ‘value-added’ (e.g. in-home lifts) & designer homes (e.g. 3-storey bungalows & low density per floor condos).
    These are no cheap ‘commodities’ to speculate on but lifestyle products for the upper tier society of Maslow’s hierarchy of needs.
    Now here is the contradiction:
    Just drive along Batu Maung new housing development & you will be surprised to see Proton Iswaras parked in many of the porches of these designer homes which have little add-on renovation (no more extra cash after serving sky-high home loans?)! This is a part of reality of home buying, either for own use & happiness or just to own one to speculate, to keep up with the Joneses or to suffer for the next 30 years (of skipped holidays & Char Hor Fun).

    The reality is not to create affordable housing for the masses but to create instant wealth-creation for themselves developers, housing agents & of course property gurus.

    No wonder the most touted industry in the halls of career development is housing development.

  3. Phua, not all are ill gotton gain. Many are hard earned with sweat and tears and they would like to scatter and put it a safer place and not to see it gone down the drain with a rotten corrupted govt.

  4. Yes its a worldwide phenomenon but the tokong make it even worse for Penang with policies that make favour the developers and make the situation even worse. By pampering the developer and not requiring them to compulsory built REAL 72k LMC apartment it has make the situation even worse. Looking at it we may not be able to buy affordable units in Penang island soon

    • affordable units in Penang island? Unlikely because of market demand for high end condos & scarcity of land.

      affordable units in Seberang Prai? Yes as land is plenty and relatively cheaper.

      Simple economics 101 of ‘Demand vs Supply’.

      Penang islanders seems to forget that Penang has Seberang Prai.
      Building bridges (and tunnel?) is already an indication of population shift to mainland to address the issue of affordability.

      • Penang islanders, especially those old timers dislike outsiders buying home and set up family on the island for fear of depriving their children to buy affordable home?

        Do not worry for your children. Let them make their own money to buy their own home even if it is away from the island. Old timers should consider the option of reverse mortgage their homes for retirement living.

    • Read This: Don’t transform Penang Hill into Disneyland, warns group over latest plans
      http://www.themalaysianinsider.com/malaysia/article/dont-transform-penang-hill-into-disneyland-warns-group-over-latest-plans

      It seems hill development is not enough.
      Botak-ing is likely the CAT fever of Penang gomen to the extent of cosmopolitanising the hills.
      Bukit Relau is but a small botak compared to the coming “hair-cut” for Penang Hill.
      Little Indian Barber, are you on call?

  5. It is the duty of the relevant regulatory authority of a nation to take
    action to tackle housing bubbles that arise from speculation.
    If not, they are being derelict in their work. You can’t just leave everything to the market
    or neglect regulating people who push risky loans (such as the subprime loans that have
    affected the US economy very seriously).

    As for Malaysians buying property in London, I won’t be surprised that
    a fair number of these are from our kleptocratic ruling political class.
    Quietly moving ill-gotten wealth overseas.

  6. Take away the banks…..and there is no bubble….no speculation…

    Bank Negara is just lying to the general public…….If Penang and Selangor have the guts, they should break the stranglehold that keep Malaysians poor…..states always control land….and they have the last say….

  7. It is the job of the state government to provide affordable housing, preferably on leased state land, say for 90 years for the medium cost ones and 70 years for the lower costs ones.
    Those land on freehold should be left alone for anyone to buy.
    This will bring income to the state. Presently, states are forming JV with developers to develop state lands which does not bring in sufficient income as some developers failed or gave insufficient returns.

  8. Is the property cooling down. Yes cooling down so much so that local will not be able to buy as developer are building condo and houses above 1 million. With these scenario even old flats and apartment rises in tandem with the price of the developers. Example new projects by developer of 700 sq ft are being sold at 700k and 1440 sq at at 1.5 millions onwards. As such even old pariah flats and apartment from 700 sq ft – 900 sq ft are now going for 350k – 600k onwards and will go further up as there will be no such aprtment being built anymore. The suite or soho will now be the norm for the developer. 400 sq ft @ 300k and above. It means that those whole salary that are less than 3k will find it very hard to buy even a low cost flat which may now fetch 200k ++. They may have to go and buy at the slum or ghetto flat.Even then it is not cheap……

    • I think nowadays everyone can analyse (like you have done) the economic and financial aspect of property as an investment and speculative commodity. So a property today is not one that serve the basic need of shelter (bottom tier of Maslow’s hierarchy of needs) but a commodity to be traded to fulfil one’s higher needs.

      If you have already got one property as your home, just be contend with it unless you can bear the frustrations of keeping up with others in the speculative game in property trade, and running risks of getting burnt when the bubble burst.

      • If you analyse it further, besides the easy home loan financing (Prior to new RPGT ruling), fear of scarcity syndrome & artificial demands (can be herd mentality speculation & developers’ “insider trading” before official launching & sub sales), the trends of property development is more skewed towards building ‘value-added’ (e.g. in-home lifts) & designer homes (e.g. 3-storey bungalows & low density per floor condos).
        These are no cheap ‘commodities’ to speculate on but lifestyle products for the upper tier society of Maslow’s hierarchy of needs.
        Now here is the contradiction:
        Just drive along Batu Maung new housing development & you will be surprised to see Proton Iswaras parked in many of the porches of these designer homes which have little add-on renovation (no more extra cash after serving sky-high home loans?)! This is a part of reality of home buying, either for own use & happiness or just to own one to speculate, to keep up with the Joneses or to suffer for the next 30 years (of skipped holidays & Char Hor Fun).

        The reality is not to create affordable housing for the masses but to create instant wealth-creation for themselves developers, housing agents & of course property gurus.

        No wonder the most touted industry in the halls of career development is housing development.

  9. The whole world is experiencing a sharp rise in property not just Penang or Malaysia. In Penang & Malaysia as a whole most property are sold out before they are launched. Actually they have not been sold at all but instead keep on hold by the developer who will sell them at a much higher rates later. A project in Thean Teik highway was launched a few years back and buyer were told that it has been sold out. Many who booked the place were shocked to be informed that the price has gone up when they went to sign the S&P. This is broadlight cheating. Worse still LMC in this project are being sold at astronomical prices directly by the developer to propective buyers and were not selected from the Bahagian Perumahaan list. Those in the perumahaan list would not be able to buy these LMC anyway as they were price 5 times above the 72k LMC limit. This is the facts and truth that is happening in the property market in Penang and how the state govt is pampering these developers and suqeezing the people left and right..

    • Your first sentence and last sentence contradicts one another.
      If property speculation is a worldwide phenomenon, it shows that LGE is not a ‘tokong’ that can prohibit it in Penang.

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