Today I will be talking about property market outlook. I believe those who got read news online or newspaper, you always will see there is plenty unsold new launch property in the market. For those who are new toward property market, let me disclose you some of the information about property in general.
There is 2 term I will be using it here.
Have you come account rebate and discount? Do you wondering what is the different between this two.
Assume a new launch property value appear in Sales & Purchase Agreement (500K) but developer is giving 20% rebate then actual transacted value is 400k. On the other hand, if a developer giving a discount of 20% of the current price which is 500k, then value appear in the Sales & Purchase Agreement shall be 400k.
Our Minister of Finance said he wish to see developer reduce the property price by 10% for those costing above RM300,000 and 6% for the affordable price.
This news can be obtain by clicking this linkage https://www.thestar.com.my/news/nation/2018/09/12/housing-prices-to-drop-by-10-rehda-penang-replacing-the-gst-with-sst-has-reduced-costs/
However, not all the developer follow the advise of the Minister of Finance. Therefore, Lim Guan Eng said if developer refuse to reduce the selling price. He might consider impost SST on the raw material for construction.
To read more on this news can be obtain by clicking this linkage https://www.thestar.com.my/business/business-news/2018/09/24/lim-we-want-all-developers-to-reduce-prices/
Example of property which giving out rebate can be click below linkage
So, what is happening right now is the market price will adjust by itself due to supply and demand.
However, it may truly reflect in accounting purpose as rebate work behind the scene and what our Minister of Finance wish to see is what is actually transacted price which reflect in the SPA. So, it come to the same ending.
At this point, you might be asking what is the different and implication if follow the advise of Minister of Finance, Mr. Lim Guan Eng.
SPA will be reflect actual transacted price
Property market will change the perception which is very surely making money by buying property.
Higher approval rate of loan application. Assume a person earning is qualify for the amount of 500k worth of property, but what appear in the SPA is 600k and this first time home buyer does not have this much of saving to pay down payment to secure the housing loan. So, is either seeking financial aids from parent helping them to pay the down payment or they have to work hard and save up more money for the deposit. With the revise to the actual market price, those who are not eligible to buy property, they stand a chance to buy their property. This align together with the new government that wish to help the first time home buyer to buy the affordable property.
The different between the rebate and discount will play lot of different on the interest repayment of the mortgage loan. If a person having a rebate from the developer 20% compare to the discount of 20% upfront, the implication is the different of loan amount which is a person commit 500k loan from a rebate and another which is 400k from a discount. So, obviously the property buyer able to save up the mortgage interest and due to compounding effect, you may save up to 5 digit depend on the value of the property.
The biggest impact will be developer rather than property buyer. If a property developer does not manage their financial well. During this bad time, a discount and rebate make a different. Let me explain this. A person who is taking 500k loan via rebate approach. Which mean payment will be release base on stage on stage and this payment total sum up will be 500k. Then developer rebate can be in the form waive first year maintenance fees or toward completion only pay back the 20%. So this 20% can be used for internal funding such as paying staff salary, pay contractor, pay for raw material, daily operation cost. Then toward completion, developer already go through the hard time. With the implementation of 20% discount upfront, which mean developer who is having tide cash flow, they can’t play around with cash obtain from the bank because developer does not have additional buffer to fund their operating cost.
What happen here, property market is heading a downside cycle and this is for sure. Its has to be soft landing and slowly drop in property price in order to boost economy. Why are people complaint not making profit when they are running a business at some shop lot which I see lot of business going in. The main reason is the property price too high and rental commitment is high. When the property price drop, which mean your rental should be lower. When a rental is getting lower, which mean fix cost of running business can be lower as well. There always got 2 type of voice when come to property price up or down is it good for economy. It really depend on the market situation.
Property price and unsold property need to be control else it could be a time bomb to Malaysia economy. If we could recall what happened over in US a decade ago, which is subprime crisis.
To understand better what is subprime crisis, you may click below linkage.
In Singapore, prior to the formation of the Housing and Development Board (HDB) in 1960, less than 9% of Singaporeans stayed in government housing. Today, HDB has built more than a million flats and houses. About 82% of Singaporeans stay in HDB housing, according to HDB’s annual report. It is a great example for reference.
Based on the recently published statistics from the National Property Information Centre (Napic), the total residential homes in Malaysia as at the end of 2017 was 5.4 million. Low-cost houses and flats accounted for 21% or 1.15 million of the total.
Read more at https://www.thestar.com.my/business/business-news/2018/06/09/new-hope-for-the-housing-industry/#8EGeSCCdKQLrFZ1V.99
So, will Malaysia follow the Singapore footstep to create Malaysia version of Housing and Development Board (HDB) which start to build affordable for Malaysia rather than given to private sector take control of the housing price.
For those who wish to get your first property at below market price build by Malaysia (FEDERAL/STATE) Government. You may click on the below linkage.
As a conclusion, I think mid range property may face some drop of property price and those olden day which you make ton of profit from property will be over. It only will happen when Malaysian income have a drastic growth which is unlikely for the next 2-3 years. For those landed property which transacted more than a million, it really depend on the location. For those multi million, it just a different of the figure to them. They just want it for own stay or investment as land is getting limited at KL/Selangor or other prime area location at other state. So, property sector may face difficulty time during this period of time. Do check out property developer cash flow as thing may get worst in the future and your investment could turn out to be huge losses if you never do your homework.
Disclaimer : Trade at your own risk. This is merely for educational purpose. Please consult your dealer/remisier for any investment/trading decision.
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