PETALING JAYA: The property market will take a terrible hit next year, with developers and house owners facing one of the toughest times to find buyers, says a real estate veteran.

Ernest Cheong said it could lead to a market crash as consumers do not have the financial capacity to own homes with some failing to even pay their monthly instalments.

“The panic (within developers and house owners) might start after Chinese New Year in February or later if the government decides to pump in money to strengthen the market,” he told FMT.

He was responding to a reply given in the Dewan Rakyat by Deputy Finance Minister Lee Chee Leong who said unsold completed residential units rose by 40% to 20,807 units in the first half of 2017 compared with the same period last year.

Lee had said the units were worth RM12.26 billion with condominiums and apartments costing over RM500,000 dominating the unsold homes in Malaysia.

However, Cheong pointed out that the RM12.26 billion is only from the primary market, which includes launches by developers. It does not include the secondary market, which is house owners seeking to sell their homes.

“Previously, house buyers needed to pay 10% as deposit. Today, the situation is different. Developers are in a desperate situation.

“That is why they are allowing buyers to pay 1% of the property price and pay the remainder upon completion,” he said.

Cheong said this “generous payment mode” exists because developers are finding it hard to sell off their new properties.

He said they are in danger of losing their bridging finance from banks if they fail to sell at least 40% of the total units. The bridging finance is used by developers to support their construction.

“This is where the danger starts. I predict if this continues, markets will crash within 24 to 30 months because consumers do not have the financial capacity to buy properties any more.

“Furthermore, developers who started building two years ago are expected to flood the market further with their units.”

He estimated the value of homes waiting to be sold in the secondary market to be around RM4 billion and expected more foreclosures by banks.

“So about RM16 billion of properties are waiting for buyers. But there is no demand. The reason is that people don’t have the money,” he said.

When the property crash comes early next year, Cheong expects the prices of houses to fall from RM500,000 to RM300,000.

He advised Malaysian consumers not to commit to buying a home unless they could save up to RM1,000 a month for at least a year.

“This is to cover for rainy days if they lose their jobs.”

Cheong said findings by the Employees Provident Fund show that 89% of Malaysians earn RM5,000 and below a month.

He said those who bought their homes five years ago are facing hardship as prices of homes were at their peak then.

On average, for every RM100,000 housing loan, a buyer pays the bank RM500 instalment a month, based on a 30-year payment period.

Cheong advised Malaysians to spend cautiously and invest wisely instead of buying any property at the moment.

“There should not be any urgency to buy a property at the moment. Try renting first.”

Somebody got super butthurt by this news.

Must be a sohai property agent who cannot stand bad news, insists negative property news is irrelevant in Property Talk. Only good news news is allowed to help him cari makan.


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There would be no smoke if there is no fire. Bank Negara seems to agree with Earnest Chong's warning of a possible meltdown in the property sector.

BANK NEGARA 6 POLICY OPTIONS TO REDUCE PROPERTY MARKET IMBALANCE

KUALA LUMPUR: Bank Negara Malaysia (BNM) has issued six policy options to reduce supply-demand imbalances in the property market, warning that the oversupply of office space and shopping complexes in major states may worsen with incoming supply.

It said on Friday the oversupply will be exacerbated by incoming supply, potentially becoming more severe than what was seen during the Asian Financial Crisis of 1997-98.

“Supply-demand imbalances in the property market have increased since 2015. Unsold residential properties are at a decade high, with the majority of unsold units being in the above RM250,000 price category,” it said.

BNM said a multi-faceted approach should be considered to address the imbalances in the property market as the effect of regulatory constraints on lending is limited. This is because developers also fund their projects using internal funds and proceeds from capital market issuances.

"There is a need for all parties, from the Federal and state governments, to property developers, to act in a concerted manner to manage the imbalances in the property market. Policy considerations need to go beyond financial regulatory measures," it said.

BNM said over the past decade, property-related investments have risen significantly (2016: 25% share of total investments; 2005: 18%).

Currently, the property market is characterised by an oversupply of non-affordable housing and idle commercial space, and conversely, an undersupply of affordable homes.

“This situation could worsen if the current supply-demand conditions persist. Within the country, Johor is poised to have the largest property market imbalances (highest number of unsold residential properties and potentially the largest excess supply of retail space). As such, it is timely for all parties to act now to mitigate any potential risks to macroeconomic and financial stability,” it said.

BNM said for the residential market, total unsold residential properties currently stand at a decade-high, primarily on account of the mismatch between the prices of new housing launches and what the households can afford to pay

First, there is a need to resolve the high level of residential properties for all price ranges. BNM said all parties should encourage the rental market.

There is a need to develop a strong rental market by enacting the Residential Tenancy Act and establishing a Tenancy Tribunal to safeguard the rights of both tenants and landlords.

Second, as for affordable housing, there should be an increase in efficiency in the provision of affordable homes. BNM suggested the setting up of a single entity for affordable housing to accelerate the rebalancing of supply towards the affordable range

“Ensure that the development of new projects are in decent locations with good transport connectivity,” it said.

Third, BNM said there should be greater efficiency in the allocation of affordable homes. It suggested that it should be ensured that applicant registries are regularly updated, verified and filtered to prioritise creditworthy households. Ineligible applicants should be directed to rental housing.

For the offices and shopping complexes segment, BNM said there was a large incoming supply of commercial properties and a high vacancy rate and low rental rates in existing buildings.

Fourth, there is a need to manage new incoming supply. Hence, the commercial viability of any new project must be thoroughly assessed before it is commissioned.

Developers should be to be cognisant of current and future demand conditions: Cannibalising effects on tenants and customers (from new malls and offices; high costs of living and rising e-commerce market.

Fifth, BNM said the parties should look into the repurposing of vacant commercial buildings. Vacant commercial spaces in prime locations could be repurposed into economically meaningful assets – such as corporate housing, en-bloc rental accommodation, art centres and indoor parks.

Sixth, increase demand for existing space. This could be done by intensifying efforts to attract foreign companies to set up businesses and expand their footprint in Malaysia. Encourage start-up occupancy by giving rental rebates.

In 1Q 2017, total unsold residential properties stood at 130,6903 units, the highest in a decade. This is nearly double the historical average of 72,239 units per year between 2004 and 2016.
About 83% of the total unsold units were in the above RM250,000 price category.

BNM said 61% of total unsold units were high-rise properties, out of which 89% were priced above RM250,000. Johor has the largest share of unsold residential units (27% of total unsold properties in Malaysia), followed by Selangor (21%), Kuala Lumpur (14%) and Penang (8%).

The large number of unsold properties is due to the mismatch between the prices of new launches and households’ affordability. From 2016 to 1Q 2017, only 21% of new launches were for houses priced below RM250,000.

Read more at https://www.thestar.com.my/business/busines...AxkihBUebylp.99

This post has been edited by ZZR-Pilot: Nov 21 2017, 06:03 PM

These numbers are solid proof of what most people hv been observing.

That developers & property punters are screwing the buyers up the arse by intentionally building property that buyers cannot afford.

They've been fucking people over by not giving them any choice below RM250000, especially in the high-rise property market. They've been building overpriced shit, of which 61% cannot be sold.

If you need to buy a house to live in, MAKE SURE YOU SQUEEZE EVERY LAST DROP OF BLOOD FROM THE SALES AGENT.

This post has been edited by ZZR-Pilot: Nov 21 2017, 06:27 PM

I didn't say anything abt govt intervention.

We'd think free market forces would knock some sense into these developers & punters, but they all seem to pakat among themselves to beat the game.

Hence the possibility of a crash next year.

If that's nature's way to correct an artificially induced imbalance, then I welcome it & look forward to it. Let those greedy bastards go bankrupt.