Economy crisis Feb 2017
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Property market will be badly hit in 2018, says expert
Minderjeet Kaur | Nov 13, 2017
Real estate veteran says property market could crash and bring
the price of new homes costing RM500,000 down to RM300,000.
Ernest-Cheong-property-market-
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 a
nd 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.”
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