i'll second that opinion!
my view on this subject. although many share the same sentiments that the worse have yet to surface, i too doubt that property price is going to have a drastic drop. emotionally wise, i sense that we could result in a 2nd recession ala W curve but i would like to share with all on the property scene.
i'm in the property/construction line for a few good years now and looking at construction costs nowadays are just plain scary. steel was less than RM2/kg inclusive of labour just a few years back and it went up to as high as rm5/kg at peak! what use to be rm200/psf saleable immediately balloned to rm250/psf! this increase of price was mainly due to increase of raw material price.
remember the diesel/petrol increased? that was a huge increase before it stabilise to rm1.80. a lot of projects/contractors got stuck. not because they wanted to but they are forced to. imagine if you secure a project at that time. every kg of steel you are doing, you are doing at a loss. if developer refuse to compensate, the contractor have no choice but to forsake the project. the developer realise this and have to compensate some back to the contractors. this is true for 'sold' projects then. developer took a huge profit margin cut.
nowadays, material prices is still going haywire. especially items which are imported. AUD$ have seen tremendous increase. but this usually applies to high-end projects. med and low end projects usually consist of local materials only. but even then, some requires import of materials.
back to normal projects. with raw material prices such as diesel/petrol, cement, sand fluctuating like nobody business, how would you think the contractor would price? too conservative, they do at a loss, too high, they lose the job outright. developer needs to cushion in some factor as contingencies for these events. else, same scenario, uncompleted projects.
so guys, if a project is selling 'cheap', beware, you might never receive your keys. this is a hard truth fact. under these circumstances, i bet you would also do the same if you are the boss of the developer or contractor. either you die or they die. it's dog eat dog world out there.
having said all that, i of course hope for better economy. but the projects that are due for handing over in the next few years are indeed alarming. property overhang will increase. maybe it will be due for a correction. maybe not. statistic wise, kl remains one of the cheapest (and i really do mean cheap) place to invest. some of hk latest project is commanding HKD40k/psf!!! that's about RM20k/psf. and klcc is having a tough time maintaining rm2k/psf!
for a win win situation, i really hope the nation vision to push for a high income society. the property can maintain their ridiculous price (to our standard) but at the same time, raise all employee's salary.
a sweeper in HK can earn HKD8000 a month. go figure how much does the guy sweeping the city center in kl earn?
if a fresh graduate commands RM5k/mth, it will justify having condos being priced rm600k outright.
that's my view and hope on the industry and future. am not an expert and i don't read much finance articles. just an ordinary joe sharing my view.
cheerios!

come on now, pai, don't be a tease. just say it.

i agree with your view. it's plain simple fact. cost of development have increased many fold. steel, cement, concrete, sand, finishing. all of it have contributed to land cost. not forgetting land cost have also increased. some developments are priced in that region not because they want to but they have to!
you guys might be truly surprised how low the margin are for some developers nowadays!
the main profiteer are the banks!

hhmmm...
let's consider this. majority of people who bought houses over the last decade are paying a relative modest loan interest. again, assuming majority of these group of people are living on edge (maximising loan), thus increase of BLR is going to significantly hit them hard. before jumping to the conclusion of bad debts and loan defaultment, let's analysis these group of people (going to basics).
let's say these group of people are mainly consisting of the working class with nominal or medium income. and suffice to say with our population distribution according to races, let's assume the same as well? am not going to dwell into political state of things from what i'm implying here but you guys should know the drift of its implications. let's just say "big brother" would wanna help out whoever that falls under these income gorup, eh?
now, when BLR increase (which it will, just a matter of sooner or later), all these people are gonna be affected. Those who can afford the revise rates, no problemo. for those who can't, you may derive from your previous assumptions on loan defaultment and similiar cases. but let's not forget another simple solution to all these worries. prolonging the tenure of loan!
given the scenario of dropping property prices versus maintaining the prices, am sure most people will vote for the latter. owners of property would do their best endeavour to increase or the very least maintain their pricing. only when there's no other way would someone consider selling at a loss. and if given the opportunity to delay selling it at a loss, wouldn't one prolong their loan and wait out till the buyer market returns?
this isn't really something new. look at car prices. we have hondas and toyotas in the sub RM100k years back. now the entry level honda is almost rm100k. for those who can't afford the loan, what did the banks do? from 3 to 5 to 7 and now 9 years loan! heck even property loans have been extended from max 55 years old to 65 years old!
now there are countries who have loan upto 60 years (not 60 years old!). these loans are service by 2 generations!
of course these kind of action are usually kinda last resort by the banks too. so am anticipating some form of drop in property pricing before these schemes kicks in and we are going to be back at square one!
just my 0.000002 cents and take it with a big bag of salt please!

~given a choice, would you want cheap property in our country like in the 80's OR property pricing to be somewhat similiar to hk/singapore pricing~

This post has been edited by kochin: Jan 28 2010, 09:41 AM

fully in support of what constant quoted. a hike in the rates would not deter property growth. at least not yet. usually a substantial hike only would deter it enough. if small hike eg. 0.5%, it's still manageable. usually when that happens, sales will drop but rest assure property price will not drop...yet. sometimes you might actually see an increase in value whereby people are aware the financing cost to own a property is increasing as well!
when i bought my 1st property, i was paying BLR+2.25% working to approximately 7.8% or something like that. my latest property purchase was BLR-2.25%.
also not forgetting the flexible rates offer by banks. if BLR goes up, they are able to provide higher (-ve rates). if BLR goes down, they provide less flexible rates.
eg. BLR 6.5%, BLR - 1.5% = effective 5%; BUT if BLR goes to say 8%, package by bank may be BLR - 3% = effective 5%.
let's put it this way, whatever loan you are in, you are bound by it for only approximately 5 years. if the differential between new package and existing package is too huge, pay the lock-in penalty, no big deal. ultimately, you will still benefit from current BLR pricing versus future BLR pricing.
all this talk about cash is king is semi true. true only if you really have a LOT of cash. and definition of a LOT is really a LOT!
anything less than a million bucks, is nothing to really shout about.
anybody wish to support my hypothesis?!
cheers!

you have much pessimism. although your points could be valid.
however, looking at the overview, assuming what you say is true and people who bought the 'overpriced' house now is unable to maintain it and were 'forced' to sell at a loss, how many in terms of overall would you foresee this to happen.
in other words, assuming a decent area such as pj. assuming a rich guy who have 10 units who wishes to dispose + say 30 units from various other people who are no longer able to sustain it. that's 40 units who are forced to sell 'cheap'. and definition of cheap could vary. in a much sought after and decent place like pj (or BU or TTDI or Bangsar or etc.). don't you think the number of ready buyers is still very much higher than sellers. that was working on the assumption that people fall during economy but there are people who also benefitted from it. in balance, the gainers will buy over from the losers, no?
eg. in recent market, and of course in decent area, everytime if an ad pops out for a unit which is say just 5% below the market value, they are easily more than a handful of interested people who is ready to punce on it. based on this i believe the rate of demand is still > supply (of course if base on the affordability of current level). in the event the price is still being raised or push higher, the demand will drop further.
only when demand < supply i foresee a drastic drop in RE. for MK holders, i think they might be in trouble. even KLCC is still ok given that the area is much larger than confinement of MK.
of course, nobody will know what is going to happen in the future and there will obviously be people who are positive and negative about it.

here's for thought: if you think RE is overprice, do you think big salary earners are overpaid as well?

building material costs is indeed rising tremendously. and more importantly so is land cost. with that in mind, let's not forget a whole lot of other costs are 'tied-in' with the development/construction costs. things such as financing, marketing, stamp duty and levies, etc.
human needs are indeed simple by nature. you have named it yourself food, clothing, shelter (transport?). when you are at limit, which would you strike of your list first?
funny that humans now do things by reverse. order of importance is definitely food, clothing, shelter. but when pressed, they will first try to starve and save a few bucks. when they couldn't, then they start selling whatever they think is valuable (clothings, computers, gold, car, phone, etc) to sustain food. when that fails, only they sell their property.
funny at how things work, right?
they will never be a clear cut answer. for those who hope prices come down, i hope you find your property with the prices you looking for. for those who hope prices keeps increasing, i also hope you achieve your wishes.
sorry for my innecessary ramblings.

in terms of psf and conversions, i was informed that jakarta and hanoi have already exceeded our highest psf (especially hanoi).
not sure about manila.

i'd heard many a times remarks of "klcc at rm1,300 psf? so cheap ah?"

to us malaysians, it might be exorbitant, to foreigners, it's like they are buying klcc although at seremban's price.

alternative is to push up RM so that property price remain but it's pricier to foreigners?

---

Added on December 1, 2010, 8:48 ami definitely x 1000 agree. our wage to cost of living is absolutely ridiculous.
whoever keeps saying owning a car in singapore is more expensive really do not know how to make apple to apple comparison.

This post has been edited by kochin: Dec 1 2010, 08:48 AM

but true to the very last bit!
last time my classmate who graduated in USA and worked there after his graduation, he owns a brand new honda accord in his 3rd month. it only cost him USD20k and he was offered a salary of USD5k per month. he was in new york then.
here? guess how long can the fresh graduate finally be able to afford to purchase honda accord??

it's just absolutely ridiculous to be paying 26% tax for taxable income above RM100k.
next time a guy say he earn rm10k/month, u should feel bad for him. why?
Gross = RM10k
Deduct tax 26% = RM2.6k
Deduct EPF 11% = RM1.1k
Deduct Socso or other staff welfare thingy = RM50
His/her take home is only RM6350.

Wherelse if a guy's pay is say RM7,500, his take home pay would not be too far from him/her.
don't believe, do the math yourself.

sales agent! they have no risk and are just selling 'services'.
land owner got risk.
directors have risks.
authority also got risk.
buyers also got risk.
forummers also got risk except those NATO.

haha.
ah pai kor's 16 properties also about that figure lah.
16 times say rm400k sebiji already 6.4mil mah.

if you think its that easy, why don't you become a developer?

land cost is subjective. but quit rent and assessment for the land needs to be paid prompty. development charges to council alone can be millions of ringgit. then there are so called infrastructure contribution, security deposit, bla bla bla all going to authorities and all amounting to millions of ringgit. also, all these needs to be obtained prior to 'launch' of project.
and upon submission of all these to the council, again, consultant fees that could bring the total to millions again.
and guess what is the highest overhead for most organisations? salary! 2nd is premise rental.
rm300k/month for company salary can feed how many head only? salary is counted with a factor of at least 1.5 lah.

i beg to differ master cherroy.
there's many advantages to streching the loan tenure.
generally, income for salaried workers will gradually increase over the years while loan repayment is supposedly fixed (unless major corrections to the BLR).
sample case:
X want to buy a landed unit at say RM1mil. but X can't afford it based on current income. let's assume X is earning RM5k and gf earning RM5k. both are say late twenties. but if bank allows them to stretch the loan to say 40 years, they are able to purchase it now.
fast forward 10 years, X and wife now commands RM8k each. they now find it 'affordable' in their unit.
fast forward another 10 years, they more or less settled their housing loan due to increase in their salary again. and of course, the unit should worth more than double liao?

i for one opt to max out my loan tenure and grew a habit of settling whenever i have surplus cash (with cash back out options, of course).

+1