Tuesday, June 16, 2015

Klang Valley's Property Market: A Bubble in the Making?

A friend has a bungalow in Damansara Heights; he was advised that his property is worth M$6-7 million. He is renting out for M4K a month. The yield is less than 1%.

I recently took a look at a very ordinary apartment in Section 16. The asking price was M1.5 million. How much could I get in rent? Net may be $4K a month? (Even then, tenants are hard to come by.) Yield worked out to be less than 3%.

My son’s neighbour has upgraded himself to a different neighbourhood. He put up his old house, which is a two-storey terrace house in Shah Alam’s Bukit Jelutong, for sale for more than M$1 million. It is still empty today, although it has been in the market for more than a year. But he just won’t give an inch in his asking price.

And all these asking prices are said to be supported by valuations that are acceptable to banks!

In another scene, the villas that had been built next to my apartment block in Saujana Resort were sold by the developer for more than M$4 million each. They are already about five years old; yet 70% of them have been left empty since built.

What’s happening?

Many people are still earning about M$5K a month. Everything is getting very expensive now. How many can afford houses now? Yet houses prices remain astronomically high.

There are still a lot of very cash-rich people in the country. Banks pay peanuts and the stock market is hovering at dazzling heights. Where else to put your money? In real estate, of course!

Never mind if there is no rental income; capital appreciation alone is enough to protect your investment.

So thinks everybody.

No wonder!

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