No bubble in real estate sector

Some global property markets are overheated at the moment, but Malaysia certainly is not in the bubble territory.

In those markets that are overheated, home prices are rising faster than salaries amid slow demand. There is also rising interest rates, and shaky loans become the norm.

These are probably the signs to watch out for. Despite all the negativity about the Malaysian property market, it is still safe.

According to Zerin Properties founder Previndran Singhe, Bank Negara Malaysia’s early intervention to remove the developers interest bearing scheme has stabilised the market.

“I don’t think the local real estate market will crash, or there is any kind of bubble. We have not experienced the typical run-up to a bubble, which is exuberance, high price increase, demand outstripping supply and banks taking huge risks in mortgages.

“Yes, unsold units have increased. Developers need to restrategise, where either the price or product will have to change,” Previndran told NST Property.

He said although launches in the first half of this year have been slow, they are expected to pick up.

He opined that other than a drop in stamp duty and interest rates, proper communication of government policies and the impact on the market are required to boost the sector.

“We expect next year to be better as the positive economic growth this year will be felt next year. Also as a benchmark, we always lag six months to a year from Singapore, and the Singapore market has started to improve,” he said.

A housing project by a prominent developer that is doing well despite weak sentiment.

Malaysian Institute of Estate Agents past president Siva Shanker said the real estate market will continue to have mixed demand.

“I think the segment that will suffer the most in the next two years are properties in the RM500,000 to RM1 million range. Anything above RM1 million would still do well as there is less competition in that price segment. Properties below RM500,000 won’t have a problem as the market is huge.

“What will carry all these projects through is the developer’s branding, location and the quality of the properties.”

Shanker also expects the secondary market to do better because it is not speculative. He said people buy properties in the secondary market for their own use or for their children.

“When there is no speculation in a sector, there is no adrenaline rush. Of course, the secondary market doesn’t have the look and feel of the primary market, but price-wise it is 40 per cent cheaper than new launches.”

PropertyGuru Malaysia country manager Sheldon Fernandez said unaffordability is still a major issue among many potential buyers who are dissatisfied with prices.

According to the PropertyGuru Market Index, which tracks the asking prices of homes in Malaysia, prices of residential homes on the whole remain stable, with a 0.2 per cent decrease from the second quarter to the third quarter of this year.

On a year-on-year comparison (third quarter of last year to third quarter of this year), asking prices continue to show a drop of 2.3 per cent.

Fernandez said there are many Malaysians who wish to transact within this year. However, although the current market is in a stable condition and developers are providing incentives, they feel that properties are still overpriced.

(Source: New Straits Times)