Property market down but bigger developers fine

Many say when your company is smaller, it is more nimble, more flexible and can react to changes faster. Quite true. However, for property developers, size does matter. The bigger you are, perhaps the more resilient you are. In fact with the right planning, during current slowdown you may be able to focus on affordable projects instead. Imagine a developer with many pieces of lands in many different states. They can now focus on the easier to sell ones first. Imagine a developer with 7 different projects. They would be able to delay some, pull in some and this allows the business to continue earning a profit even if the pace and the margin is slower and smaller. Now imagine if you are a developer with just 1 or 2 projects. What can you do during slowdown? Well, not much. Going ahead, it may not sell well. Not going ahead, cashflow problem. It’s just not easy when you are a smaller developer.
Before you now think then everyone should buy from bigger developers, do note that there is no such relationship. We buy because we like. We like because it meets our expectations. That’s all. Do not think too much about whether these developers get better ratings from an international rating agency or not. In a local english daily, Moody’s said that Malaysia’s property market will be slowing down this year but the expectations would be that the bigger developers who are listed would do just fine. They said these bigger developers are more resilient. Again, one major reason was also because these developers are now targeting the middle-income households with their projects. Everyone knows demand is still strong but without the right price, it’s going to be quiet.
Moddy’s also outlined many other reasons why they do not see a strong Malaysian property market for 2015. However, it said, “Despite these headwinds, our central scenario is for a soft landing in the Malaysian property market. Housing demand from middle income households will remain resilient.” Now we can heave a sigh of relief. Property market is slowing down but nowhere near breaking down. Opinion from an international rating agency always carry more weight than when I said so many months before. I hope Moody’s analysis comes true. I do not mind a slowdown or fall in prices. I hope it falls too, for the sake of many first time home buyers.
written on 6 Mar 2015
next suggested article: Buying a Property, away from Analysis Paralysis


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