The Edge Property, Photo Credit to The Edge Property
clock 28-06-2017
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House Prices to Finally Start Dropping

"House prices will never go down” is probably what we hear whenever we are told to invest in a residential property. And property developers have enforced that time and again, citing the rising cost of construction and strong demand from a growing population.

However, the latest data from the Valuation and Property Services Department's Property Market Report 2016 showed that the Malaysian House Price Index (HPI) had in the fourth quarter of 2016 (4Q2016) stood at 243.3 points, down by 1.8 points, or 0.7%, against 3Q2016.

This is the first quarterly decline since 4Q2008, when the HPI contracted by 2.4 points, or 1.83%, to 129 points from 131.4 points in 3Q2008. Since then, the index has been reflecting an escalation in prices, until now.

The report stated that the quarterly dip in 4Q2016 was attributed to the downtrend in prices experienced in most states, with the HPI in these states seeing negative growth of between 0.1% and 3.2%. Other states that have recorded a dip in the HPI include Penang (-3.2%), Sarawak (-1.9%), Sabah (-1.4%), Kuala Lumpur (-1.4%), Pahang (-1.2%), Perak (-0.9%), Kelantan (-0.5%), Selangor (-0.2%), Kedah (-0.1%) and Perlis (-0.1%).

Henry Butcher (M) Sdn Bhd chief operating officer Tang Chee Meng says the quarterly drop in 4Q2016 does not surprise him, considering the current soft market.

"When the HPI records a decline, it means prices have registered a drop, so one can conclude that on the whole, prices have declined in 4Q2016 from the previous quarter, which is clearly a manifestation of the soft market condition" he tells

He adds that the price dip could also be attributed to the lower net prices of some new property projects due to discounts via rebates, freebies and interest-free easy payment schemes offered by developers, although their official prices may not have dropped.

Looking ahead, Tang says it remains to be seen whether the drop in 4Q2016 is just a temporary blip or the start of a downtrend over the next few quarters. "My personal view is that the HPI will recover in 1Q2017 but will remain fairly flat through the year.”

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