Nov 14 2017, 09:30 PM
QUOTE(ZZR-Pilot @ Nov 14 2017, 05:35 PM)
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.”
Star Business – 18th July 2009Ernest 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.”
Stories by SHANNEN WONG
IT can be extremely frustrating to be at the mercy of property developers who have abandoned their property projects, not least because most of them do not offer any explanation to their house buyers.
When asked, this is the usual excuse provided by developers: “We are temporarily having some minor problems but will revive the project as soon as possible.”
“Soon” unfortunately, more often than not, turns to years of waiting for the victims.
Cashflow problems, demand shortage and budget over run, owing to poor planning by the developer are mainly the causes that lead to projects being abandoned.
But while some abandoned projects are caused by unanticipated market conditions and economic uncertainty, including rise in building materials and labour costs, there are many cases where developers have only themselves to blame.
Industry observers say there are cases where developers have channelled purchasers’ deposit money for personal use while some others deliberately hold back their projects for better resale prices.
There are also instances where developers inflate progress payment claims to draw more money from purchasers and the banks. Observers say this can be done with the help of architects, who are responsible for issuing certificates on the construction progress of the purchased houses, which are then used for progress payment claims.
“As progress payments are disbursed to developers through these certificates, end finance banks can be misled into making excessive payments,” Ernest Cheong PTL Chartered Surveyors property consultant Dr Ernest Cheong tells StarBizWeek.
“Some of these developers end up not using these inflated payments to develop the housing projects,” he says, adding that perhaps they would channel it for some personal investments.
But when these investments sour, the consequences are dire; the developer will not be able to pay the contractors and suppliers and the brakes are then slammed on the construction activities.
“This is what contributes to the problem of rising abandoned housing projects,” he says. But in most cases, the culprit is poor planning and research. Developers that rush into a development without comprehensive market study will most likely find themselves stuck in a project due to poor cashflow.
“They end up facing poor sales due to the mismatch of supply and demand patterns in the project location,” says PPC International Sdn Bhd executive director Thiruselvam Arumugam.
Chan Ai Cheng, the general manager of S.K. Brothers Realty (M) Sdn Bhd, says developers shouldn’t be over ambitious and ought to be realistic.
I extract the article from 2009. This is a negative guy all the while......
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