KUALA LUMPUR: The property market is not headed for a crash, but it is facing tremendous structural constraints. This includes a supply-and-demand mismatch and tighter credit conditions.
The Edge reported that despite the huge inventory of unsold units that developers were holding, a crash was unlikely, but prices were likely to be stagnant.
The past seven years of exuberant property prices are likely to be over.
The Edge quoted Sunway Business School professor of economics Dr Yeah Kim Leng as saying: “A collapse of the property market is highly unlikely at this juncture, given the strong economic growth, low unemployment rate and moderately strong wage growth.”
He noted that the Malaysian economy expanded by a robust 6.2% in the third quarter of the year while unemployment remained unchanged at 3.4% in September.
The report said although property prices had decelerated to a more moderate pace, they continued to rise.
“Property prices in some locations have run up too much, to the point it does not make sense anymore. This tends to be for the high-rise and high-end properties in the KL city centre. It is ridiculous to pay more than RM2,000 psf. It is inevitable, and even healthy, that some prices come down,” Paramount Corp Bhd group CEO Jeffrey Chew was quoted as saying.
Based on the Department of Statistics’ Household Income Survey 2016 data, households in Kuala Lumpur and Selangor had the lowest proportion of homeownership in the country. The survey estimates that 37.8% of households in Kuala Lumpur and 29.8% of households in Selangor were either renting or living in some form of government quarters.
In contrast, the national average was 23.7%, The Edge reported.
The report said in almost all states, it was clear that even at the upper threshold of what was considered affordable (four times annual median income), property prices were well out of the reach of most people.
By bringing down the price points over the past year, the report said, developers had managed to tap into the pent-up demand for property a little.