When locals could not afford, that’s a really big issue.

The property markets of Sydney and Melbourne are favoured by many foreign buyers, especially Chinese (China). There are lots of valid reasons including the fact that both are listed in all the typical most liveable international cities in the world. The Chinese parents may have bought because their children may also be studying in Australia too. Anyway, this is the same for many super-wealthy Malaysians who bought properties in London. However, what if the property prices rose to a level that most local buyers could no longer afford? Would a bubble burst?
Actually, based on the median property prices in Sydney versus the median income for the typical households, it’s already considered grossly unaffordable to many Australians themselves. Here’s one latest article about it. The only saving grace is that Australians love properties and thus would do their best to get one. This is a very a different situation if we are talking about emerging markets instead of an advanced one like Australia.
This is one recent article about how foreign buyers are really pushing up the demand for properties to the extent that based on just prices per sq ft, the prices are higher than even many neighbourhoods in Greater KL!  It’s about Phnom Penh. Article by South China Morning Post here.  According to Cambodia country head at property consultancy Knight Frank Ross Wheble, Phnom Penh will have 22,828 luxury apartments by the end of this year. This is already more than double the current number of 8,942 units.
What’s more alarming is that the prices per square metre is US$3,500 (RM14,000). (If we calculate on a per sq ft basis, this is RM1,400 per sq ft. We do not have this price even in areas such as Mont Kiara or Desa Parkcity yet. The local currency is not favoured and the US$ is used instead. This meant that prices are rising 4 times faster than Malaysia, currency wise.) The rents can be easily US$1,000 (RM4,000) per month. Please refer here for the article again. 
In case everyone’s wondering if Cambodians earn much higher salary than Malaysians, well, nope. The upper income is around RM40,000 per annum. Yeap, that’s the minority. Middle income earners can be up to RM16,000 per annum. So, they definitely cannot afford a US$1,000 per month rental. Okay, so if the condo market is supported mostly by foreign buyers, is it safe? Would the property bubble burst, if any?  Well, it depends on how far and how long would these foreign buyers be willing to support the market; believe in the market’s continuous rise in price.
We must always remember that when the property market is pushed up by foreign buyers, it’s also very likely that at the first instance of problems, they would dump the properties. The owner holding the property last would face the biggest issue.It’s not up to us to worry. Always look at our own market and be very worried if the foreign buyer numbers rise to a very high number. I personally rate anything below 10 percent as ok but the last I checked, the foreign buyers interest in Malaysia is just not high enough. Transactions remain low. Happy following.
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written on 5 June 2018
Next suggested article: Foreigners love condos in Thailand and Malaysia


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