All developers currently are raising their prices to take advantage of the current property bubble. I have been going around looking at properties for the past 2 yrs since im looking for my 2nd property. Most properties in prime areas are demand driven and not market driven. This is good news for sellers but very bad news for buyers as they will need extra funds to purchase and also higher downpayment since banks evaluations will always be lower.

For example, a ground floor low rise unit (1400 sq ft) in Kiara Park Condo, TTDI,KL used to cost about RM 470 about 1 year ago. Now the same unit is going for RM680K. Today there is an add in the Star Classifieds for a 2nd floor (walkup low rise) unit going for RM 668K. There were similar renovated units transacted for RM 655K around March/April this year. This condo is about 17 yrs old and yet the prices have appreciated so much in the past few years.

Dijaya Group is selling its Tropicana Phase 5 condo for around RM830K for a 1400 unit although the first 4 blocks were sold for much lower and its currently tenanted to many Africans & Middle Eastern ppl. Tropicana Grande is going for RM1.5 mil upwards. The funny thing is that both these developments are on lease land and yet command such high prices.

Is there a property bubble in the Klang Valley? Yes im sure of it!

The problem is most of these inflated priced properties are being sold as we speak. There are filthy rich ppl actaully buying these properties despite its high prices. They wont stop and thats what creates a property bubble.

Its different in Singapore. The condo market there is booming because landed properties are like a diamond mine due to lack of land. Here in Malaysia, we dont have such a lack of land. Land prices in KL have been inflated by unscrupulous developers. All the developers have joined together to raise prices.

Condo's are always more risky compared to landed properties. Its not the same in Singapore where even a basic HDB flat still commands a premium price.

This post has been edited by cybermaster98: Oct 19 2010, 01:50 PM

Tropicana Grande condo starting price is already RM 1.6 mil for a 2,283sq ft unit and that too on lease land. Some condos in TTDI have appreciated by almost 40% in the past 1 year.

This post has been edited by cybermaster98: Oct 19 2010, 03:02 PM

You need to check your info again on TTDI condos then. The prices in TTDI are demand driven. So no point asking property evaluators. In Kiara Park condo for instance, 1370 sq ft condo's were sold for about RM 470K mid last year. Now the same units are going for 650K+. There were 2 similar low rise units sold for RM650K in April this year. Now there is another unit for sale at RM 688K.

U need to understand the meaning of 'demand driven' first. Big difference from 'market driven'. Demand driven is not a blanket price increase. U will get some choice units going for very high prices and some going for normal prices. But currently the trend in TTDI is more to 'demand' driven. Thats why obtaining a bank loan is quite difficult as banks evaluate based on market prices. The units in Kiara Park & Villa Flora condo's are traded very fast. There are some units that are sold within 2 days of the add appearing in the papers / internet.

Its really crazy in TTDI now and i believe in most high end areas.

Im not surprised. Some condo units in Kiara Park, TTDI appreciated by RM180K in 12 months.

Yes this is true. I have friends who have lived in California and they told me that you can buy a bungalow house on a hill overlooking the ocean for about USD 500K.

Appreciation of value is dependent on the entry price for that area. For example, if the market prices in that area is 300 psf and a new development comes in at 400psf, then the rate of appreciation will be much slower for that new development. But for existing developments, if there are many new developments going for 400 psf, then the original market price jumps to 400psf or more.

So before purchasing any property, u should always check the rate of increase in that area. U also need to survey the prices in the surrounding areas as this will have an impact in your area. Look at TTDI KL. The prices here keep going up because of newer developments in the surrounding areas of Kota Damansara and Mutiara Damansara at equally high prices.

Right now in KL, most of the medium end properties are rising much faster than high end properties. Developers are also launching new phases at high end prices to take advantage of this price increase.

With all these crazy price increases, it is proof that the property bubble is already happening. As with all bubbles. it will burst and those who have bought at much inflated prices will pay a heavy price. Only upscale and stable areas will be safe. So please do not even consider buying properties in non - prime areas at these over inflated prices.
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Property investment in the new decade

The times have been good for property investors in the past couple of years. Prices in certain areas, particularly in selected areas of Kuala Lumpur and Petaling Jaya have risen significantly, some as high as 50 percent. And as a result of this rise, practically all property investors had made money. In fact, some people have seen their net worth jump up by 30 or 40 percent because of the price rise. For example, a young colleague who purchased their house two years ago saw the value of their house increase from RM950,000 to RM1.3 million today. Of course, the owner was all smiles when they told me the story.

I am happy for them. As an avid property investor, I have benefitted from the rise myself, so I am certainly not complaining. At the same time, I must admit that I have some reservation about the whole scenario. The price rise has distorted reality to many investors, including my colleague. Because the price climbed up as soon as he bought the property, and remained at a high level even today, his view on property investment is seriously distorted. He thinks that:

1. Prices will go up as soon you buy a property.
2. The gains will be in double digits per annum.
3. This is normal.
4. Prices always go up.
5. It is easy to make money in properties.
6. He is a super genius when it comes to property investment!

Long-term property investors will quickly point out that none of the above are true. That’s right – none! For starters, I can tell you the current situation is exceptional. It wasn’t like this five years ago, and certainly not ten years ago. I can also tell you that times are not going to remain this good forever. Prices do not rise to the sky, and interest rates do not stay low forever. In fact, interest rates has already climbed (or to use the toned down term of ‘normalised’) by 75 basis points already this year.

Why am I so sure of this? Simple; I have seen similar euphoria before (the first in the mid-1980s and then in year 1997 during the Asian Currency Crisis), and the story did not end well on both occasions. Like most bubbles, prices edged up slowly initially. The initial buyers made money and this attracted others to invest into properties as well. And as prices climbed higher and higher, the euphoria got to the levels that some people were rushing to buy because they were scared that the prices will spiral out of their reach if they do not act then. But when the market crashed, as all bubbles eventually do, a lot of people were seriously hit, a lot of money was lost, and that included seeing their properties being auctioned off by the banks.I see the same story being repeated today. On top of the ever present dangers, there will be massive challenges in this new decade. There will be much turbulence in the coming days, and some of them will be unlike what you and I have seen or experienced before. This may include double-digit interest rates, multiple bank failures, currency crashes and explosion of the derivatives market.

As a result of the new challenges, the investors using the current success formula of buying five properties at one go (by paying the minimum down payment and borrowing to the hilt) will be seriously hammered. They will experience much pain, to put it mildly. Some people will lose their properties, some will lose more than money and yes, some will become ex-millionaires.

This post has been edited by cybermaster98: Oct 26 2010, 11:22 AM

Depends on your property value. For example 20% of a 200K property is only 20K. The costs of the lawyer fees , etc wont be worth it. But if your property is 1 mil then 20% would mean 200K which should be good.

Many properties in prime areas are going much higher than market prices. Its because these areas are demand driven not market driven. People still but because they know that these prices will remain or go up further. Prime areas like Bangsar, TTDI, Damansara Utama, Damansara Heights, etc have always been on the rise. So people are still willing to pay demend driven prices for these choice locations. The only problem that arises is when u try and get a bank loan as banks evaluate according to market rates. But u can always get the evaluation waived.

20% higher is nothing. There are condo units in TTDI that have appreciated 40% in 12 months. All due to demand.

This is the general increase. For properties its always location specific. U cannot take general figures and assume thats the case for all areas. There are places in KL which have appreciated between 40-50% in the past 1 year. Yet there are also areas which have dropped alot.

Which condo units in TTDI u aware of the price increase?

That red stickers and sold out status are all crap. Just business gimmicks used by developers for many years to push up the expectations of the purchasers. Im always in the habit of asking them to show me proof that the units have been sold. They can easily show u the booking forms and cover the names of the purchasers if they are indeed telling the truth.

Well i havent really been that interested in new launches. But i think if everyone continously asks and points this out to them, they will realise that the general public knows their tricks. Awareness is everything.

I dont think it will burst soon since it just started. Bubbles need time to develop and more time to actually burst. The property industry in Singapore and Hong Kong are still booming and show no signs of bursting any time soon.

Its not that anybody is saying dont buy property now. You can buy now but ensure that the property is in a mature area where the prices are stable and even if there are any property bubbles, the price will still hold. If u wanna buy in other areas u can still buy but do not hold the property for long.

A property bubble is defined as an unsustainable rapid increase in valuations of property relative to incomes and other economic elements, followed by a sharp reduction in price levels.

The key word here is 'unsustainable'. This refers to a property price which escalates to a level which is outside the normal median and then crashes. Not all price increases are defined as 'unsustainable'. Price increases in mature areas are mostly sustainable as seen in the past. So buying in those areas will still be possible. But the risk comes from purchasing properties in other areas. You may end up making a profit now but if you are still holding the property when the bubble bursts in a few years, then ure in for a very tough time.

YEs but again it depends on location. Condo's in high density areas like KLCC, Mont Kiara and Mutiara Damansara will be hardest hit. But stable areas like Bangsar & TTDI wont feel such effects as much.

Older condos in prime areas will hold. Its the new launches at inflated prices which will be hard hit. For instance, Kiara Park condo in TTDI was priced around RM 220K during its launch in 1993. But the same units are going for about 580K - 650K now. Thats an increase of around 270%. It was a gradual increase over the years due to the rise in stature of TTDI. Condo's like this will have far greater holding power compared to those in Mont Kiara and KLCC.

This post has been edited by cybermaster98: Nov 2 2010, 10:55 AM