More supply equals lower prices? Or less demand?

AllianceDBS Research said that due to high incoming supply, the house prices would continue to moderate until next year. It said that incoming supply will be the highest in 10 years and this is good for house buyers. The current environment for property sales remain challenging and the strong house appreciation over the last few years driven by cheap liquidity is unlikely to recur. (I agree! Prices cannot go up simply because of affordability. How many really and truly rich people are there in Malaysia?) Well, the report did say that demand from genuine homebuyers continue to be strong. I think the demand must be complemented by ‘easier’ prices, somehow. Certainly, those RM750 per sq ft developments or higher must pray that the buyers would flock to their projects like years ago.
Future property launches are taking a longer time to sell just like the periods before 2011 where projects typically take two to three years to be fully sold. (I think the report may not have noticed some of the projects which have been completed today and still have buntings saying ‘limited units available. Yes, even for projects completed more than 1 year ago!)  It said that demand for development projects in prime locations with attractive pricing and selling points would continue to well. (I think they are right, people are still absolutely crazy for certain locations and would not even buy 15% lower simply in an area 10 minutes away. Sigh, no wonder prices for these areas remain at a premium)
AllianceDBS said that the current weak sentiment was mainly caused by slower and harder loan approvals despite keen interest from potential buyers. (Let’s be very objective. The banks must also be prudent and not lend just because the buyers are willing to buy. It must also correspond to the value that the bank has assigned to such a property. Buyers may be crazy for that certain property due to a host of reasons but banks are not obliged to lend, ok?) It said that developers are trying to make their units affordable through smaller sizes.
No property bubble is expected because prices are likely to remain firm even under current circumstances. It said that this is due to cost-push factors. I think the results from these developers have shown that there are certainly still rooms for slight adjustments and especially through smaller sizes. Besides that, Malaysia’s strong economic fundamentals and a robust banking system has also ensured no such bubble is expected. I repeat, “strong economic fundamentals and robust banking system.”  Of course, anyone who chose to believe that the economy is about to collapse can also believe so and take appropriate actions. Nothing wrong with whatever view, as long as one act according to what one believe in. Please do not ask if the economy is about to collapse and yet follow though with a question of where to buy. Haha… Happy reading.
written on 12 Sept 2015
Next suggested article: Spotting signs of a property bubble, 3 points (updated)


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