Property trends – where are we heading to?

There have been many speculation (and subsequent refuting by various parties) of a property bubble. Year 2009 marked an economic slowdown due to the global financial crisis, while year 2010’s economic recovery was largely boosted by the government’s economic stimulus package.

Some attributed the astronomical price increases in hot areas to the suppressed demand of year 2009. In that year, it was common for developers to offer 5% downpayment and 0% interest until upon completion of a development. Similarly, banks offered attractive rates, where the interest rates were at approximately the high 3% or low 4%.

Escalating prices

2011 came and property investors had to rethink their investment strategies. Prices of properties have surpassed the levels recorded before the crisis and in the first half of 2010 itself, prices of landed houses in some popular areas in the Klang Valley, Penang and Johor have appreciated by 10% to 30%. Bank Negara Malaysia (BNM), in its “Financial Stability and Payment Systems Report 2010”, stated that house prices in selected locations within and surrounding urban areas had increased to four times higher than the national house price index.

BNM has been staying on the pulse of the market’s movements and implemented a loan to value ratio of 70% for third mortgage borrowers. However, crafty property buyers have resorted to using their spouse or relatives’ names when applying for loans. Some have opted to take the commercial route, as the required downpayment is at an average of 80% (as opposed to 70% if the buyer has more than two residential properties currently). Plus, the capital gains and rental yield are relatively higher than residential properties. Hence, some buyers have changed their strategy by investing in commercial properties.

Proceed with caution

In early May 2011, BNM raised the overnight policy rate (OPR) by 25 basis points to 3% and increased the statutory reserve requirement (SRR) by one percentage point to 3%, and as such, banks have raised their base lending rates (BLR) and base financing rates (BFR) by 30 basis points to 6.60% respectively. Banks that offer BLR minus 2%, means that effective interest rates are still below 5%.

However, property investors should look at the slight rate hike with caution. It is imperative that property buyers make decisions based on repayment capability, and also factor in expected rental yields.

New developments continues to mushroom especially in the Klang Valley and Greater Kuala Lumpur and reports have indicated that investors are still very much active, with investors snapping up units during property launches, despite the price increase. Analysts have indicated that it is still too early to measure the impact of current regulations.

Property Investment Convention 2011 (PIC 2011)

If current property trends and regulations are at the top of your mind, join the Property Investment Convention where current topics of interest will be analysed and shared by various speakers.

The convention will mainly be about movement in the property market, the current and future trends based on the MRT, how to purchase as regulations change, how to tweak your strategies in view of the changing regulations, managing your portfolio, diversifying into REITS, and many more.

The speakers include:

- Best-selling author and property investment coach, Milan Doshi

- Location researcher and map maker, Ho Chin Soon

- The master of lead generator and co-author of the first ‘Lease Options’ book in the UK, Vincent Wong

- International property investment trainer and co-founder of Wealth Dragon in the UK, John Lee

The Property Investment Convention is scheduled to be held on 6 and 7 August 2011 at The Gardens Ballroom, Mid Valley City. Register now at www.wealthmasteryacademy.com/starpic.

By The Star