Stay safe, buy within affordability and stop bubble building

Property bubble will burst when majority of all properties in the market becomes so expensive that no one could afford to buy one. That’s why when everyone is buying above what they could afford and the banks still lend to them, we are staring at a potential property bubble bursting. Read here: Spotting signs of a property bubble, 3 points (updated)  Well, recently reported in The Star, Bank Negara Malaysia’s governor Tan Sri Dr Zeti Akhtar Aziz advised first time home buyers to buy within their affordability. My first property was also just a 700 sq ft apartment in an area which Penangites do not love. Truth is, not everyone can afford to buy a landed property or condominium as their first home. What’s wrong with an apartment? Not many can afford to buy in hotspots. What’s wrong with expanding the choices to those areas 10 minutes away? There are still landed properties for below RM500,000 if you really must buy landed but it is not going to be in Mont Kiara or Bangsar lah. Even buying a property in Kuala Lumpur meant lots of areas o choose from and not just that few….
Prices in hotspots did not go up simply because of land cost or labour cost. In terms of land cost versus gross development value (GDV), it is still around 10 percent or maybe up till 15 percent. The prices of these hotspots went up because majority of everyone somehow believed that they must only buy that few hotspots only! This created a demand which is far more than supply in that particular area which actually does not apply to every other secondary choices. That’s why there are areas which can easily sell at RM1,000 per sq ft but we can still find those which are priced at just RM400 per sq ft if not lower today.
Banks are still lending but because of their internal property valuations, they would not lend everyone 90%. Some properties deemed too expensive would meant they are willing to release just 80% or lower. According to Zeti, the loan-to-value ratio for first-time home buyers is different. Of course, they must still demonstrate that they have passed the test of affordability that they can afford to buy the house. It would be worse if someone were to buy something above what they could afford and this may cause them to sacrifice some of their other basic needs.
Want to know what the industry is saying? Well, House Buyers Association is asking everyone to play buying their property as prices are sure to come down, perhaps next year. Read here: HBA: Buy property later, prices are falling This is however not the only point of view. REHDA said that due to the increasing of their costs including labour and the effects from GST and a falling ringgit, the prices of homes have to increase or it will be tough for the developers to build. Read here: Ringgit down, thus property prices up Do decide on the side that you want to believe. As for me, I would agree with Zeti because we must think about our needs first, not wants. Given a choice, I would love to buy a landed property in Desa Parkcity for example but I needed to also take care of my other basic needs. This is the reality we just have to accept. Note though that quality of living wise, we may just have to change our lifestyle a bit and we can buy one level up. Buy objectively ok. Read here: Buying a new home? Ask why, not just where
written on 30th Sept 2015
Next suggested article: Why High Density condo is better for me


  1. I really admire your work rate and the ability to write daily!
    That aside, thanks for the sound advice of asking ourselves first on OUR needs. There are illusions perhaps with the mindset of wanting to get rich quick, that we aim for the grand prize – often at unbelievable ignorance to the risk.
    Choose hotspot if it is only within your capability.

    1. Thks Ilhan. Your encouragement is the motivation for me to stay disciplined. Yes, we must buy based on our own affordability. Not staying in hotspots are not the end of the world. Happy buying.

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