SOS Malaysian Housing Revisit

Recent article from The Star (last Saturday) posted an article of the rise in landed properties around Petaling Jaya. There was an average increase (link houses) about RM200K-400K in the last 1-2 years. Some example are, Bandar Utama, Mutiara Damansara, Kota Damansara, SS2, Tmn Tun, Damansara Jaya, Bangsar, Section 5 & 6 PJ etc..

Some of the opinions:

1. RAM rating agency in real estate and construction said that the affordability issue will continue for the landed residential units, are likely to increase this year at a slower pace than last year.




2. International Real Estate Federation (Fiabci), Mr Yeow said "We are in a situation where people are using the property market to GAMBLE."

The sharp increases (landed residentials) appears unprecedented. Who would imagine a semi-D at Mutiara Damansara launched around RM800K less than 6 years back is now RM1.8m. Some double storey link in Seri Utama (Kota Damansara) more than doubled in less than 10 years. The begging question is WHY? Same old explanations were, limited good location land, increase in construction cost, low borrowing rates, higher land cost, keen demand on prime locations.

MyView

Thanks to partial speculation, partial fear of scarcity of prime locations, partial fear of losing out, partial fear of continuous rise (will be out of reach), and the do no wrong herd mentality. Semi-D in Mutiara Damansara went up RM600K in 6 months from RM1.2m to RM1.8m, believe it or not. Of course, this is far from Desa Park City.

It appears to me the buying comes more from fear than genuine purchase (not under pressure). For the same "fear factor" when the collapse comes, it will over shoot as well. Of course, real estate is not as liquid as stocks, it takes 3-6mths for each transactions, hence, when the market is down, there is no rush.

It appears that a decent double storey link house in PJ is now around RM800K, easily 10-15 times the affordability ratio for the middle household income in PJ. So other than what they called in FAMA (father and mother) scholarships, it is beyond the reach of those just graduated or even 10 years in employment. A survey also shown that there are less than 5% in Klang Valley earned more than RM10K a month.

When will the music stop, no one can be sure, but the BUBBLE is definitely formed. Thanks again to easy credit, which more than double over the last 10 years, definitely faster than growth in household income.