Why Property Price in Malaysia Hardly Increase?

I heard many people are talking about how high property prices have gone up throughout the years and the buying a property seems to be a no-brainer investment with the perception that the price will rise eventually. 

Before we talk about the appreciation of your property investment, various factors have to be considered as not all houses/shop lots out there is a gem. 

Malaysia has been experiencing an oversupply of high rise properties and the lack of demand for it. Salaries barely even increase with yearly inflation rate quickly erase any surplus one could enjoy.

Here is why the price of Malaysia property would remain stagnant for the coming years.

The Baby Boomers Era is coming to an End

Those who are born between the years of 1946-1964, the youngest would now age at 54 while the oldest is now 72 years old if still surviving. 

Note: You can read another great article about communicating with millennials here.

https://steemit.com/howto/@maverickfoo/8-ways-to-communicate-better-with-millennials

People who are born within this timeline would be likely to enjoy lower property price and stock market gains in the bullish year of 1993-1997. Not to mention the rise of the internet. 

House prices were affordable during this era, and there is no law to prevent the“flipping” of property. Hence, the house price climbed quickly surpassing more than 100% of its original price. With the help of the bull market, everyone was optimistic about the future, and there is no stopping in buy calls everywhere. Until the bubble came and swept everything away. 

Millennials, on the other hand, have been discouraged by the exorbitant price of properties that is an indirect effect of the baby boomers doing and inflation rate. As opportunity is left scarcely, a shift has been made by millennials to invest in the internet instead of properties – Demand decreases.

Malaysia Land Area is not the same as others

Many people like to compare Malaysia with Singapore and Hong Kong stating that the house price in Malaysia is still affordable despite the current price point. What they failed to take into account is the population density of each country.

Know that Malaysia has a land area of 330,803  and a population of 31,190,000(2016)

It has a population density of 94.29(Total Population/land area)

Means for every square kilometer there are 94.29 people.

Let look at Hong Kong:

-Land area 2,754 

-Population 7,347,000 (2016) 

-Population density = 2667.76!

That is a whopping 2667.76 people in a square km land. There is not enough land to accommodate everyone in Hong Kong as compared to Malaysia, which explains the drastic surge in property value in Hong Kong. Malaysians are not desperate for land compared to other countries.

Related article: https://www.nationalgeographic.com/photography/proof/2017/07/hong-kong-living-trapped-lam-photos/

Unaffordable pricing

Source: Giphy

With the rise of living cost and low buying power, many are unable to afford a house. Also, the higher rental rate could also shunt your potential tenants as personal commitment remains a priority. This would lead to deficit yield instead of the promised positive yield when you purchased your property. 

Since the price of the house is high and rental business becomes a losing business, people are not keen to add on any burden to their financial portfolio. Thus, the price of the property would be stagnant.

As for now, landed property price is stagnant while high-density property prices are declining. High cost drove developers to build smaller units. We will be seeing such trend for years to come until the next bull cycle occurs when the glorious day is back to encourage people to invest once more. Then, we may see the rise of property price again.