The Commoditisation of Decent Housing

Selling to Those Who Cannot Afford

The prices of housing is going up especially in prime areas in the Klang Valley.

The last four years saw terrace houses shooting to almost half a million ringgits in the Klang Valley.

About 85% of the workforce, mostly between the ages of  25 and 35 years of age, earns about RM 5,000 or less.

When houses go to prices beyond RM 400,000, it is difficult for them to buy as their income will only allow them to buy houses at about RM 250,000.

Sadly, such medium priced houses can only be bought south of Nilai or  north beyond Rawang. The cost of transport will 'kill you' if you buy so far away.

With developers producing high-priced houses, new graduates who are saddled with PTPN loan and car loans will find it hard to even secure  loans to buy houses.

As developers get more greedy and profit-driven and continue to build high priced housing schemes and banks continue to lend to those who actually cannot afford to own houses, the bubble may come and we may join the ranks of Greece, Ireland, Portugal and Spain anytime within the next 2 years or so, if we are not careful.

Many are speculating that the bubble will burst once buyers are no longer buying.

So, when there are no buyers, developers will be stuck with housing stocks and they would have to get rid of this overhang with more inventive marketing.

In my opinion, the bubble may have been postponed by BNM's 80% financing limit.

I also believe that developers are also slowly having less launches of boutique housing types and will build accordingly to a more conservative price-range.

So, while the the bubble may have occurred to some extent  in the commercial and condominium sector in the Klang Valley, I do not see it happening in landed residential property as yet.

So, I would expect those public-listed developers to continue building high priced boutique units in and around Kuala Lumpur and Petaling Jaya.

So, let us look at the trend of property starts as the year roll by.

<object width="560" height="315"><param name="movie" value="http://www.youtube.com/v/hv9bWjgEXtc?hl=en_US&amp;version=3"></param><param name="allowFullScreen" value="true"></param><param name="allowscriptaccess" value="always"></param><embed src="http://www.youtube.com/v/hv9bWjgEXtc?hl=en_US&amp;version=3" type="application/x-shockwave-flash" width="560" height="315" allowscriptaccess="always" allowfullscreen="true"></embed></object>