29 October 2013

Impact of Budget 2014 on Malaysia Property Market

Yesterday we saw a significant price volatility on Singapore counters that have significant exposure in Malaysia Property development, such as Albedo & Rowsley. The reason why I think so is that the impact of Budget 2014 on Malaysia Property Market.

If you are not aware of, the property price started to surge since year 2009 after global financial crisis, as there are many countries tried to stimulate economic growth by pumping a lot of money into the market and cause a drop in interest rates. When the money are not used usefully in business development, one of the safest ways is to park under Real Estates instead of earning low interest rates in banks. So we now see Singapore and Malaysia Property market could surge more than 100% in few years time.

There are few reasons why the price surge. Firstly, Inflation causes a weaken money purchasing power, and the real wages increase is not much. Secondly, increasing interest of hot money in Asia countries, partly due to weakening economy of Europe & America, caused the supply could not catch up with sudden demand.

However, the people in both countries can feel the pain now, as majority of the citizen working in the city, especially those who are fresh graduates could not afford to buy a house near to their working places. In KL, it could cost at least RM400K++ to own an apartment near Taman Melati.

So now Malaysia government is trying to push harder to curb speculation by introducing few measurement:

  1. Increase of RPGT from maximum 15% to maximum 30%
  2. To prohibit DIBS Scheme and do not allow Financial Institution to borrow money to developers under this scheme
  3. Increase of floor price for foreigner purchase to RM1.0M from RM500K previously
I believe above measurement can at least stabilize if not to reduce the selling price of developers in prime area, especially some of them claim to use DIBS scheme to attract buyers who just need to pay for the down payment and dispose it off 4 - 5 years later. I believe the proper market will cool down soon as it may raise to the concerns to those buyers who try to speculate in the market. 

Nonetheless, the only way I think to curb the surge of property price is to increase the interest rate. It will definitely reduce the demand of the excess cash to park under real estate.

1 comment:

  1. Good say. I noticed quite a significant number of properties counters, i.e SUNWAY E&O MAHSING dropped yesterday; 70+ counter dropped . Do you mind to share your analysis in my blog http://tzlcl.blogspot.com/ ? Thanks.


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