Do remember that a good yardstick that we can use to determine if our property prices are sustainable or otherwise is the gross rental yield. Generally, rental yields of between 4-5% mean that the property is overpriced while yields of 6-7% mean that the property is fairly priced.

So when rental yields start dropping below 6%, that usually means that we're heading towards an unsustainable level and investors should practice extreme caution when investing. Most rental yields now are around the 4% range which is actually dangerous.

So always practice prudence before investing. Appreciation of the last 4 years should never be taken as Gospel truth for future capital appreciation. We are at the tail end of the property boom and nobody knows how long the next slump is gonna be.

The bubble has already happened. The question now is when will it burst and how bad will the effects be. Some areas may experience major slumps while certain areas may only experience stagnation. Its the holding power of the investors which will determine how badly the property performs during a slump. If investors cannot hold on to their properties in the face of rising BLR, RPGT taxes, stamp duties, etc, then prices will drop eventually when subsale buyers stay away.

You can compare gross rental yields for both periods and then see the difference. First based on original price and next based on completed price. When I purchased a property in 2011, I was looking at a rental yield of 5.35% but it has since dropped to 4.8% now. So I know that my property price is heading towards an unsustainable level.

The tail end of the boom is 2013 I think. 2014 will see prices stagnating or dropping in some areas. 2015 will see more drops in more areas. But again, all this will depend on the holding power of the investors and Malaysia's economy in general.

That's the herd mentality which allow developers rake in millions in profit while investors without holding power are left high & dry when a property slump happens.

A good example is The Twins at Damansara Heights. Many of the investors who bought here were expecting easy money upon VP but now 2 years after VP, the condo is only 30% occupied and many owners are stuck with their units. The situation will become worse once the BLR goes up next year.

Who would have thought this would happen to The Twins at this location? Even I didn't and im surprised. The residences above Publika is another example that things aren't looking rosy anymore in the property market. Take a drive around Mont Kiara at 8pm on a weekend and see how many condos there are just 30-50% lighted up. Its actually quite worrying.

I didn't say ALL condos are 30-50% occupied. Its a general comment. Take a drive and see yourself. I live nearby so I know MK and Damansara areas quite well.

The negative comments are not about Fennel as a development but rather the financial stability and risk profile of the investors. If you have the holding power, you can invest in most properties and make some decent profit later on. How many ppl do you know who purchased properties in 2009/2010 and didn't experience good capital appreciation?

The key question I always tell ppl to ask themselves during this period is this:

Can I sustain the property if I cannot sell or get a tenant for at least 2 years after VP?

If your answer is yes, then go ahead. But if your answer is no, then re-evaluate your options.

Never take into account future earning potential when calculating current property purchase. If your salary increases, then take it as a bonus but using it as a yardstick to qualify your purchase today isn't a wise thing to do.

Nothing to do with fairness. Its solely done to create the euphoria and boost the overall image of the development. Its to create a herd mentality that will be talked about for time to come. Its the word of mouth that sells in the property world. YTL has created this and even developers like EcoWorld & SP Setia have followed suit. This allows developers to make a killing and create a platform to launch their future developments.

Have you noticed a trend? The projects which required such sale build-ups and euphoria were always those which were priced above the subsale market of that area. Can you show me a development which was launched with such fanfare at prices which were reasonable and affordable in accordance with the vicinity? I don't recall any.

Either way, whether this euphoria will result in good future capital appreciation upon VP is another matter altogether. In fact, if you do some research you will see that developments which were launched without much fanfare have not only achieved the same record sales but also have been real value buys.

Fennel is a good product with a great infrastructure around it but I think YTL have been a bit unscrupulous by creating this herd mentality. They have focused too much on just merely making a sale without concentrating on getting investors with solid financial grounding.

How many of the investors of Fennel 2 can withstand a property slump expected around 2016? Yes Fennel 2 will complete end 2017 but seasoned investors know that recovery from a slump takes about 2-3 years so owners of Fennel 2 will be getting their keys at a point when the market is just about to begin a recovery. How many can hold on to their investments for a year or two without being able to sell or find tenants? On top of that its widely expected that the BLR will go up by 50 basis points in 2014 and a further hike is possible in 2015 if the slump hits. So we're looking at BLR rates of about 7.35%-7.60% by 2016. BLR takes time to come down. This is where the problem begins. Many of the investors in Fennel are not single property owners. Many have multiple properties. These will be hardest hit when interest rates rise and they cant sell / rent. But this problem is not limited to Fennel investors alone. It affects everybody (me included).

U need to read up more on the property slumps in Dubai, US, Vietnam and Australia. U mean to say all those investors who were hard hit all bought with cash? Do u know why property slumps are always tied to the term 'debt crisis'?

The following article will give you some insight on the reality of a debt crisis and how volatile the banking system is:
http://www.bloomberg.com/news/2013-11-18/c...ank-crisis.html

This post has been edited by cybermaster98: Nov 19 2013, 10:38 AM

Yes same here. Fennel a good product but its the investors which have bought into the project which scares me. If even half of these investors start dumping units upon VP at lower than expected prices, it will bring down the rest of the camp. That's why projects with low own stay investors will always be highest at risk. That's why areas like TTDI, Bandar Utama and Bangsar are always able to withstand economic downturns and property slumps. Rental yields may be low but capital value will generally hold.

Almost everybody who invested in property in 2009 onwards made very good capital appreciation. The question you should be asking yourself is which part of the property cycle was that in?

So when money is eaten by inflation, would that increase the number of ppl who can afford high value properties or decrease when salaries remain stagnant? Owners can increase the price all they want but in the end there must be a buyer. Malaysia is currently a buyers market and this will get worse in the near future.

Everybody is looking at new launches and the number of ppl lining up to buy. But how many ppl are observing the secondary market? Are sales as good? Everybody assumes that they will be able to sell after VP as easily as they bought it during the launch. That's the main problem. Not many of the ppl who go around investing in new launches with the herd mentality have any idea what-so-ever- of the situation in the secondary market. They don't understand that the factors which helped them invest in new launches (DIBS, free SPA, free loan fees, no valuation, etc) are not gonna be present during subsale. Plus you will be competing against a few hundred other owners with the same intention. That's how it becomes a buyer's market.

This post has been edited by cybermaster98: Nov 19 2013, 01:23 PM

What's in store for 2020? U still believe in Wawasan 2020? That's long gone la bro.

Anyway, here's an interesting article i read today:
http://www.thestar.com.my/Business/Busines...ors-beware.aspx

Yes. The rule of thumb for investors (in my opinion) is your answer to this question:
Upon VP, can I sustain my investment if I cannot sell or rent for 2 years?

If the answer is yes, then you can go ahead but if your answer is no, then re-evaluate your options.

You can also share your opinions here:
https://forum.lowyat.net/topic/3031756


This post has been edited by cybermaster98: Nov 19 2013, 03:17 PM

This I agree. But in your opinion, what do you think would happen to the development if say 50% of the owners start offloading at lower than expected prices if they cant sell or rent out after VP?

This is a very real risk faced by many of the new launches in KV. So its not something that has a high degree of improbability.

Ask yourself this question:
How many of the investors of Fennel have the financial strength to hold on to their properties for at least 2 years upon VP with no option for sale or rent?

Ure again going back to that same redundant argument. Why do u keep using Safron and Tamarind? Those were properties bought and sold during the bull market. Of course anybody who invested here would have made money when they sold. Don't u get the point? What holding power do they need when they were in a bull market? Holding power only becomes a necessity during bear markets.

Yes but to assume that Fennel is going to appreciate in the same way and quantum as Saffron or Tamarind is just foolhardy.

If own stay many places also ok la.