RECENTLY, the Institute for Democracy and Economic Affairs (IDEAS) was reportedly said in a statement that the government needs to get ready for the property bubble to burst and the risk this could lead to an economic crisis.
Everyone is, of course, entitled to his or her opinion, butI wonder why IDEAS came to this conclusion.
As we all know, the property market has been in the doldrums for many years now. The downward slide began in 2012, and 2013 saw the market perform even worse. Things continued to be bad throughout the years, culminating in 2016 and last year when not only the total volume and transactions dropped but also the total values—the first time in many years.
Granted, there are many segments of the market that are currently oversupplied.
Some segments, especially the high-end condominium sector, had seen unusually high numbers of units being built although it was obvious, at some point, that supply was beginning to exceed demand and that it didn’t look like the situation was going to improve in the shortto medium term.
Developers continued launching new units by the hundreds despite falling sales and buyers no longer flocking to show units in search of quick gains. Speculators disappeared and with them went the hey days of large crowds gathering at developers’ offices, sometimes from the night before a launch, hoping to get their hands on choice units.
But these developers caught on fast and slowed down their launches. Those who weren’t committed to a project chose to defer their launches until the market improved. This led to some of the overhang being slowly absorbed by investors who were in the market for the longer term as well as buyers looking to purchase for their own stay.
The first two months of this year managed to registeraslight improvement, compared with the same period last year.
Of course, this data is by no means conclusive, but an improvement is an improvement.
Will it sustain throughout this year? No one can tell, unless the person has a crystal ball and can gaze into the future.
The results of the 14th General Election and the euphoria that followed have created a much-needed feel-good factor not only in the property market but also for the general economy. My friends in the passenger car industry told me that sales in the last two months had been spectacular.
Of course, this could beamad rush to benefit from the short tax holiday due to the zero rating of the Goods and Services Tax.
The Malaysian market is largely driven by sentiment rather than facts and figures or conclusive data. If many people believed the market was going to improve, it would inadvertently do. I believe we have been inanegative territory long enough and the current feel-good factor and optimism that things are going to improve will drive the property market forward.
Of course, the oversupply situation is real. Several sectors of the market will need time to correct themselves. Don’t expect miracles. Any improvement will be gradual and will take some years to gain proper momentum. The market will slowly improve and gradually rise over the next few years. What we need now is steady, long-term investors. Speculators and those hunting for short-term gains are what had caused this problem in the first place.
Another phenomenon we must be vary of is the so-called “Property Investor Clubs”. During the industry’s hey days, they had caused untold damage. Thousands of people were convinced to buy properties that they neither needed nor could afford.
These clubs are usually led by some self-proclaimed “Gurus”. These Gurus do a splendid job of convincing young gullible speculators to buy properties, who oftentimes make multiple purchases on the assurance that they could make easy gains in the short term.
When the market turns bad, the Gurus and their investor clubs disappear, leaving thousands of their members in the cold.
Those who have been told that they could easily sell their properties for as much as 40 per cent gains suddenly find that there are no buyers for their properties. They are now left holding these babies on their own. And, as their mortgage payments kick in, these speculators start to become desperate.
With the market showing some signs of improving, I am beginning to see these investor clubs making a comeback. Perhaps, there need be no surer signs that the market is indeed improving than the proliferation of these clubs!
Whether you are a seasoned investor or someone just starting your property investment journey, be wary of these getrich-quick schemes. You would do well by reminding yourself that nothing good ever comes easy. If something sounds too good to be true, it probably is indeed too good to be true. Approach with caution.
Happy hunting and may the force be with you.
The writer is a real estate practitioner who tries to manage the labyrinth of the property market honestly while consistently maintainsahigh standard of ethics in his practice. He welcomes feedback via siva@miea.com.my