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clock 18-03-2019
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Property Market Issues of Today, Explained

In an informative but long article by Thean Lee Cheng in The Star, the author talks about several issues affecting the property market today.

These include the residential overhang that has gone into billions of ringgit, high house prices, the oversupply of houses in the wrong locations and high household debts.

Residential overhang

Cambridge dictionary defines "overhang" as something that has a negative effect on a situation. The example below reflects the actual situation in the country.

"Prices are unlikely to increase while there is an overhang of 40,000 unsold new houses." Thean used the right word instead of using "oversupply" which doesn't reflect the actual demand for affordable properties.

Let's understand that the current Home Ownership Campaign (HOC) all over the country is aiming to reduce this overhang number. Hopefully you'll see a clearer picture after June 2019.

Stubbornly high house prices

Let's understand that once someone buys a property at RM400,000, it is highly unlikely that they will sell their properties lower than RM400,000 unless they were unable to service their mortgage and had to sell fast.

The government wants to ensure more people have a roof over their heads at an affordable price but not by pushing down property prices that have been transacted.

Hence, they are building houses instead of pushing down the prices of current homes.

Banks have their exposure in the housing market and will be worried if all properties prices suddenly drop. This explains why property prices have not dropped despite a slowdown in transaction numbers since 2013.

Oversupply of homes in the wrong location

Homes in some wrong locations may be remedied with connectivity. In fact, these should be indicated clearly in the unsold numbers so that people are not too alarmed by all the numbers of unsold values. The media should be objective when highlighting this issue.

High household debts

It seems that Malaysia is a country with high household debts. Malaysia's is at around 85%.

Australia's is at over 120%. Canada's at 100%. New Zealand's at over 90%. The United Kingdom is still higher than us while the US is close to 80% now.

The rate of unemployment continues to be low and there are very little speculative activities pushing up property prices.

Finance Minister Lim Guan Eng said household debt is under control for 2019 with stable incomes.

As for speculative activities, try to buy an overpriced property today and see if the bank will approve the loan as it is.

The public should have more information they can understand and digest. Only then will those who have sufficient savings buy a property. The businesses that are holding back from investing will invest.

The economy could be driven by domestic demand and not remain too subdued due to the negative sentiments prevailing in the market today. Objectivity is more important than negativity.

This article first appeared in kopiandproperty.com

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