Malaysian House Price Index is negative 0.7% quarter on quarter!

This Malaysian House Price Index (MHPI) has been released every quarter. In fact if we were to refer to we could see they have average numbers all the way back to 1990. This is the number derived from property transactions. It is NOT the price the owner wants to sell. It is NOT the price the buyer wants to buy. Without a transaction, nothing changes for the Malaysian House Price Index.

Property price is still increasing or decreasing

Looking at below would tell us that on a Year-to-Year comparison, the price has increased by 0.4%. This is like no movement at all. Meanwhile quarter-on-quarter basis, means in comparison to the previous quarter, then the price change showed a decrease of 0.7%. Again, this is considered insignificant but it will be significant if we continue to have two more quarters of negative downtrend.

Return on Investment? Do not be surprised.

If we are to look at property as an investment over a period of 10 years, say 2010 to 2020, then the home we bought in 2010 may have just doubled in 2020. Do refer to the image below for the average property price in 2010 and the average property price in 2020. Imagine the return on investment?

2010: RM200k property price. Downpayment of RM20,000.

2020: RM400k property price. Increase of RM200k. Returns = RM200k / RM20k = 10x. In other words, based on a simple calculation, our ROI was 100% per year!

Another way to show the calculation? RM200k increase in price divided by 10 years = RM20k per year. We invested RM20k in first year and every year, we get RM20k in returns. Yes, this is 100% per year yeah… I know, we still need to minus the stamp duty, legal fees and maintenance etc but if you still do not get my point, it’s okay. Please move on to other investments. Property investment is a very slow moving asset.

malaysian house price index
Image course: Napic

Malaysian House Price Index – who says landed gives the BEST return?

My good friend always remind me that high-rise units, the number can increase easily. Landed properties meanwhile are limited because of the limitation of land. When supply can increase quickly, the price will not. Capital appreciation in terms of property price growth would thus be very limited. Well, perhaps we look at actual number shall we? Image below is from Napic.

When we look at the average for all houses, we could see that prices nearly doubled after 10 years. Meanwhile the top performer is really LANDED. It belongs to terrace homes. If you bought one in 2010, the property price have increased by more than double! The second best performer is however not another landed property. It’s not semi-detached and it’s not detached either. It belongs to high-rise units with an average increase in property price by close to double.

Focus on the right property. Not who’s right.

Stop arguing about landed or high-rise. I will let you win anytime you say landed is better. I will just continue buying good high-rise properties. Start understanding that as long as we did not buy the wrong property in either the landed or the high-rise category, we will do just fine. Remember yeah, urbanisation will continue to happen and it is highly unlikely that everyone would be able to afford a landed property in bigger cities like Greater KL, Penang or even Kota Kinabalu…

So, we have learnt a lot by just looking at the Malaysian House Price Index. Happy understanding.

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