Has the property market peaked?

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Over the last couple of years especially, property market prices have shot through the roof as investors and speculators and sellers worked themselves up into a frenzy. Prices have almost doubled in some places.

In some countries, the real estate bubble has long since burst. For how long more can we see prices rocketing in Malaysia? House and apartment prices are being priced out of the reach of many working- and even middle-class Malaysians. That is why housing loans for the purchase of residential property have soared from RM167bn in May 2007 to RM230bn in September 2010.

China is getting tough on speculators, as this report from the Globe and Mail indicates:

“We can see that the government is sending a strong message – houses should return to their basics, which is to be as a shelter by function, and not a vehicle for speculation,” said Andy Zhang, managing director of the China operations for global real estate brokers Cushman & Wakefield. “Should these measures effectively squeeze out the bubble and curb speculation, demand for investment purchase will substantially shrink. As a result, sales volume in [the] mid- to high-end residential sector will decrease substantially.”

At stake is whether speculators are driving real estate into a bubble which could collapse, deflating the Chinese economy, which has just overtaken Japan as the world’s second largest. Officials are caught in a delicate balance between trying to keep inflation down and basics like food and housing affordable for the masses, while still maintaining China’s impressive economic growth.

The World Bank has cited real estate crashes in Japan and Ireland as a warning to Chinese officials to rein in their finances. “China must carefully study the cases of Japan and Ireland, where the collapse of the real estate bubble caused a financial crisis and economic stagnation,” the World Bank’s chief economist Justin Yifu Lin told a Beijing University symposium recently.

Others put it more bluntly: “The history is pretty bleak. These things always create bubble situations and they always end badly,” said Michael Pettis, a professor of finance in Beijing University’s Guanghua School of Management, who warned the government’s efforts may help in diverting excess liquidity from real estate, but that the fundamental problem remains. “I think it’s going to be a long, slow deflation of the bubble rather than a burst – more stable, but more expensive in the long run.”

The Malaysian Insider carried an intriguing article here.

Maybe, we should listen to the wisdom of my nearby pau-seller. (This was the same guy who told me a few days before the 2008 general election that he sensed most Penangites appeared inclined to vote for the opposition this time around.) Towering above the hawker centre where his humble pau stall is located in a hawker centre in the suburbs, six blocks of apartments, each about 35 storeys high, are nearing completion. The asking price? Over half a million ringgit each.

The pau seller grumbled, “These property speculators are not thinking. They are driving up the prices with their activities and making a tidy profit, but they forget that their own children might not be able to afford houses of their own in the future, if prices continue to rise like this.”

What do you think? Is the party over for the speculators? Will the bubble burst anytime soon or is it going to reach a plateau and slide or rise gradually?

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sunny

More bad news — the anchor tenant for (a certain mall) and the other key tenant … have shut down … just after Chinese New Year. From what I understand, the other smaller tenants have no choice but to bundle up… What will be its fate with TESCO coming up round the corner? What’s going to happen to (the mall)? What’s going to happen to (all the other malls in town)? And more…

Ahmad Sallehuddin

Believe me. There are many vacant existing apartment/condo units on Penang island despite many new launches these days. People are herding & buying for investment. IF there is less takers and more still coming, sure there will be bubbles.
If you can afford, go ahead.
Otherwise, just wait for the true bargains down the corner.

lim

Indeed property prices has peaked – peaked in the sense it has been
manipulated – no thanks to (some of) those unscrupulous real estates agents , developers out to make a fast buck – what not – the property prices are grossly over priced and is not reflective of the current market – agree with those comments – just be patient – the property prices will soon reach realistic and reasonable levels again

so?

As clever as commentors here, go ask your dad and mom whether there’s any house or apartment that they wish they’d have the b… (no pun intended) to purchase ten or twenty years ago. Penang is no China. nice location is nice location. That’s it. You can wait for the bubble to burst of which you’d still haven’t got the b… to buy cos that would be the ‘downturn period’ or you can buy a unit that you can afford now and let it grow along with inflation (teh peng is RM1.30 now and it won’t burst anytime soon). Bargains… Read more »

kabler

If you can afford it then go ahead. Nobody’s gonna to stop you 🙂 if it bursts then good for us. If it not, we just keep renting and keep the excess money.

kabler

Addendum – It’s not about “buy what you can afford” per se. Sure lot’s of penang dwellers can afford 300k, 400k, 500k, 600k and above condos/aptmts. The issue here is is it wise to spend your hard earned money and locked up with a 30/35/40 year loan tenure for a heavily bloated, unjustly priced properties?

Take Lavinia Apartment (950-100sqft) average price for example to give a picture:

2006: 160k, 2007:175k, 2008:220k, 2009:300k, 2010:420k.

Even teh peng price didn’t increase that fast :p

so?

Lavinia?? which unit are u referring to? Renovated? Or the one near the longkang? high floor , low floor? Simply tembak and scared the … out of yourself. Do your homework and buy la…

ok ok. Go sit at the corner and wait for bargains bin…

kabler

lavinia is just one example and i’m talking about the good, fully renovated fully furnished units.

just take any of the good condo/apt like lavinia, vistaria, pearl garden, sunrise garden, you get what i mean – nice condo with 1000-1100 sqft build up. the YoY price increment is just too ridiculous.

take the teh peng anology again – would you pay for a teh peng which which is priced RM1.90 now compare to RM1.00 back in 2006? I know I won’t, even though I have the means to pay for RM1.90 or more 🙂

S Muniandy

… Let those foreigners pay for the overhead cost of big housing projects.
When the bubbles caused housing property to collapse, then we go in to pick up cheap bargains.

Believe me.

sunny

Two housing developments in Juru were launched a couple of years back. I remember being told a road was going to link Batu Kawan to that place. Now PDC office in Batu Kawan told me that the road is not going to happen. What now…? The property developer has made their bucks… buyers are stuck with over priced houses somewhere out there…

O

Agreed, and new property developers are still telling the public that link roads will be built and a prestigious Chinese secondary school will be built in Simpang Ampat, where the developer had donated a piece of land for the said cause!

Can the State Government approve the building of schools or is the Federal Government responsible for it? Or are the developers the approving authorities for building of schools? The Authorities must take actions …!

wira

Education is under the control of Putra Jaya.
Cannot build or start any government school without their approval.

That’s why schools can even bar CM, MB and state ministers of Pakatan states from visiting schools or attending school functions.

Feringgi Boy

Don’t worry, stay in Perai where housing is more affordable and go to work to Penang island on BEST, thanks to the vision of LGE’s government!!! ———————————– As reported on The Star today: WITH the Best shuttle system, 16 Rapid Penang buses will take commuters from Seberang Jaya to factories in the Bayan Lepas Free Industrial Zone (FIZ) from Monday to Friday. Commuters will need to pay RM1 to park their cars in Sunway Carnival Mall’s car park and board the buses at the bus stop outside Billion Shopping Centre in Seberang Jaya between 5.30am and 8.10am. The buses will… Read more »

O

And the favourite trick of developers? They will advertise their properties are sold out when 70% are sold! They will then hike the price through agents! A case in point which I found interesting is the apartments build in KPB. Starting from 200k+ it was increased a couple of times even before the condos were ready. And the latest, is the developer of a certain guarded community project in Simpang Ampat, mainland Penang. The project prices had been hiked at the whims and fancies of the developers with buyers practically on their knees. Remember, there are no proper infrastructure as… Read more »

kee

Hi, O, thanks for your sharing. Ya, we need to tell people not to fall into the trap of (certain) developers !!! I notice too, (certain) developers (tend to) put up the sign “SOLD OUT” but whenever there is a property fair, the same project comes out again, and at a higher price. (A certain developer’s) apartments are selling for more than RM800k plus for 1,000 sq feet. And they told you early birds got a discount !!! By the way, thanks Feringgi Boy, to those who are against Lim Guan Eng, Best shuttle system is brilliant !!! Lim Guan… Read more »

O

Hi! Kee, Visit public auctions, during this time when people are going crazy over new properties! I smelled something fishy when properties are being auctioned. You will make handy profits if you care to take the time to survey the properties for auction. I bought a double storey house for RM40,001 in a public auction a decade ago on the mainland and today it is easily worth RM250,000. Last year, I managed to buy another single storey corner lot in Bukit Mertajam, good area and well kept house for RM112,000. It is easily worth RM200,000. The funny thing is almost… Read more »

kee

O, congratulations for making heaps !!! Am not as lucky as you la. I bought a bungalow lot in Taman Kempas, SP, and am stuck !!!

Getting old… health is wealth to me now.

Am trying to simplify my life, satu rumah duduk cukup la. Credit card also satu saja, returned the rest to the banks when 50 ringgit was imposed.

All the best and cheers , good to see you around !!!

James Bond

… No share market to play so…they all have moved to the property market….

Dont buy…rent only…let the bubble burst….and even then dont buy….if you do …you are just helping (certain) greedy bankers, developers and this government which encourages this nonsense….

sugarb

Free advertising on the internet has provided the vehicle for speculators to shout what-ever price they like. Nothing to lose — free advertising — all is needed is a sucker to come along.

And like it or not we are influenced by the prices quoted and imagine that’s the market price. Nowadays, it is not uncommon to see prices marked down by tens of percent after a several unsuccessful attempts.

kee

SamG and kabler, thanks for sharing…

Everyone is buying into investment !!! Yes, let us all be vigilant and dont bite the bait.

Now, (certain) apartments around 1,000/1,100 sq ft, they are selling for half a million. I find that it is madness !!!

I hope all will be like kabler, then, surely the price will come down when there is no demand. The problem is, we are all very gullible.

SamG

Interestingly, my vendor told me yesterday (1/3/2011), that he was involved in brokering a couple of apartment deals. (At one apartment complex) in Penang (2 units), with about 2000 sq ft was sold below RM400K as the owners had to bite the bullet & take a huge loss.
I know that a swallow does not make a summer, but are these the signs leading to the tumble?

O

Sam, care to share the contact where the KLCC clone were sold for less than 400K?

kabler

The unholy trinity “Agents, Bankers, Valuers” – (sometimes) these 3 work hand in glove to jack up the property price in Penang. I’d like to share a piece of my experience regarding this. 1) I surveyed for a good 1100sqft condo. Market price as the agent mentioned was RM390k – RM420k. I thought that made sense since new projects around that area are launching at around the same price bracket. 2) The unit was partly renovated, unfurnished. Thought that the price was about right considering that every single agents and every single ads in the internet gave the same quote.… Read more »

Ong Eu Soon

Rent. don’t buy. The rental is dirt cheap. My rental is only RM350 inclusive service charge of RM100. Net total rent is RM3000 per year. A 10 year lease cost 30,000 and I don’t see any chance of rental increment in the next 10 year. A 10 year interest of 8% will make a loan of RM50,000 to be RM100,000. The interest alone is more than the lease cost by RM20,000. The rental did not reflect the value of the property. Only fool committed their financial freedom for an inflated property.

kabler

Where did you rent? how many sqft? RM350 for the whole unit or just a room? Can you sublet to me haahhaaha

wira

20 years ago, a semi D house with 3500 sq ft build up area at a prime location on Penang Island went for RM350,000.
Today, it is worth at least RM2,000,000.

Even without considering the rentals, that ROI is a cool 9.5%.

So keep on renting and continue to pay the invisible tax in the form of inflation.

Your landlord is laughing all the way to the bank. 🙂

wira

Oh .. I forgot to add.

The pessimists were telling everyone then too that RM350,000 was an inflated price because the same house in Butterworth was going for less than half the amount.

Even KL houses were cheaper.

Gerakan K

That is the sign of GOOD economy of Malaysia under our 1Malaysia PM Najib.

kingkong

In this case, good news – if expensive, there will be no new building will be built due to few buyers, no development on hillslope, no land reclamation and no congestion. Middle and rich house owners will be very happy but poor people continue to stay in squatter areas.

Albert Du

Please do not easily be taken in by those ‘positive’ news on properties in the local press. It (may be) that those reports are ‘sponsored’ by (certain parties with vested interest).

moo_t

Speculation? When government (may be) part of (this), what can typical people do is wait for the judgement day.
China property market are inflated due to oversupply of currency inside the country. Ironically, Malaysia seems are doing the same, inflation of goods show the trend.

S Muniandy

I wish the developers continue to build more and more.
Then the bubble will burst soon.
Finally I can afford to buy one home in Penang when I can handpick property when there’s a big sale of 25%-30% (actual value) when there is big glut of unsale ready uniots on Penang Island.
(Developers), make my wish comes true in 1 year time perhaps ?