SOME REAL EXAMPLES

                                                                                 1997          2014

Terrace house in Damansara Jaya                           270k        1,400k    (inflation about 10%)

(household income up only 3-5%, so it takes more than double the timeframe to buy a terrace house)

                                                                                  2009         2014

Terrace house in Kajang                                           250k          700k

Condo in Old Klang Road                                         200k          600k

It is not extreme to say, properties prices increase mainly due to this 3 parties, banks(easy loans), government (inflation) and greedy speculators (properties clubs and individual speculators).

The cost of building a condo in Setapak today is RM400k for a 1000sf 3r2b.  So, it is not possible for developers to launch at prices of less than RM400k.  Developers are selling it around RM550k to RM600k.  Developers are not selling any cheaper psf wise, but they are building smaller units, without DIBS, without goodies (legal, stamp duty or fittings).

WHAT WILL HAPPEN NEXT (referring mainly on CONDOS)?

2015- 2018 - There will be many units of CONDOS completed.  The real effect will be felt the most in 2016/7, that is when speculators holding power drop after one or two years of no rental or sale.  

This is mainly because many launches in 2011-2014 (easy money/loan during this period).  Prices went double within 2011 and 2014 for many condos.  So, those who just got their units completed, there will be very FEW buyers, one, because it is HARDER to get loan and two, the new launch is cheaper (but in smaller units).

Given a good scenerio, a speculator has one to two years holding power.  Some only 6 months.  Let just say, a speculator gets his unit at say RM800k for a 1000sf, and there is no tenants (due to high rental) and not many buyers, his monthly commitment for loan say, RM3500 per month + RM300 maintenance + other costs (quit rent and assessments) - it will cost this speculator about RM50k per year.

Each year will cause him RM50k, how many years do  you think he can sustain?

WHAT ABOUT CONDOS ABOVE RM1.0 million?

For owners, no problem, just live in it.  For speculators, not sure if they can sleep. Next few years will be TENANTS market for sure.  Assuming you get a RM800k loan, you are payign easily RM4500 instalments?  What about maintenance?  Last few years, 80% speculators 20% buyers, thanks to:

1. low entry schemes

2. DIBS

3. Freebies (stamp duty and legal fee)

4. Investors clubs

5.  Inflation (including doubling for material costs)

What happen NOW? Tight loans from BANKS.  How to find secondary buyers?  

Speculators will suffer.  Normally, they will have a couple of years before they start PANIC.  So, the best time to look at it is late 2016 and 2017.  Provided banks are not as strick.

WHAT ABOUT NEW LAUNCHES?

Less new launches and lower take up rates, unless hotspots or branded developers and smaller units.

WHAT SHOULD WE DO NEXT?

Most purchasers will stay sidelines.  Always remember, the rule of thumb to find out the cost of building of the condo is about 2/3 of the launched price.

BLOG THAT YOU MAY BENEFIT (www.sosfinancialplanning.blogspot.com)

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1.  Free Financial Planning templates

2.  Great Defensive Stocks to consider (under Wealth Builder 2014)

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4.  Education planning for your kids

5.  Myths that rich people don't need protections and investment planning

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