Please take this entire post with a huge grain of salt. I am not an experienced investor and I have no special knowledge of the local market. Plus I can and have been spectacularly wrong. So this is all just amateurish speculative musing. Also, this is mostly written from the perspective of a property investor. If you’re buying something to stay in yourself, you can rarely go wrong so long as you’re happy with what you’re buying.<\/p>\n
The talk of the town lately is the ongoing boom in residential property in the Klang Valley. No one in KL could possibly have avoided noticing that double-storey terrace houses in desirable areas are now in the RM700k to RM800k range. That is up from around RM500k just two to three years ago. And prices are still going up with no end in sight. Despite recent moves by Bank Negara to curtail lending for property purchases by limiting loan amounts to 70% of the value of the third property and above, lending has actually increased in the first quarter of the year.<\/p>\n
Normally a boom in property goes hand in hand with a booming wider economy, so there are usually few complaints about expensive houses. Look at the example of Ireland where the property boom brought prosperity to large numbers of people. But the steep hike in prices without corresponding increases in income has prompted widespread public outcry<\/a> here. Plenty of younger Malaysians are concerned<\/a> about the affordability of houses in the Klang Valley. Over the past two weeks, I’ve participated in a number of discussion threads on the topic on the LYN forums. So this post will be a summary of the arguments I’ve made and the counter-arguments I’ve heard.<\/p>\n First of all, not even the most enthusiastic bulls think that price increases on this scale are sustainable. Being optimists, they have an annoying tendency to always see the inevitable price correction as being two to three years away, so it is still a good time to buy. But they also argue that at worst prices in the Klang Valley will stagnate for a while but think it is more likely that price increases will be more moderate in the future. Their arguments are roughly as follows:<\/p>\n These are pretty good arguments, but I think the bears can advance a pretty good argument of their own with just one word: China. More than ever, I think Malaysia’s fortunes, as well as that of the entire Southeast Asia region, is tied up with that of China. The problem here is that China has a huge property bubble of its own. A discussion of the evidence for that is way out of the scope of this little blog post, but here are some links:<\/p>\n As I posted on LYN, a crisis in the Chinese property market is different from the US subprime crisis for the following reasons, cut and pasted from the relevant LYN thread<\/a>, so pardon the lack of formal language here.<\/p>\n Due to this, when people talk about house prices in the Klang Valley and speculate about whether they’ll keep going up or whether we’re overdue for a correction, I like to point to China as our bellwether. I think that as long as the party lasts in China, house prices in the Klang Valley will stay high. But if China stumbles, prices could come under some serious strain.<\/p>\n <\/p>\n","protected":false},"excerpt":{"rendered":" Please take this entire post with a huge grain of salt. I am not an experienced investor and I have no special knowledge of the local market. Plus I can and have been spectacularly wrong. So this is all just amateurish speculative musing. Also, this is mostly written from the perspective of a property investor. … Continue reading Property prices in Malaysia and economic forecasts<\/span> \n
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