Let’s be honest. 2015 was not a good year for property market. 2016 will be worse, that much most experts agree. The new events in 2015 like GST, ringgit depreciation, property cooling measures, banks tightening measures even earlier government policies have all played a part in influencing the market to what it is now.
But what exactly are the changes and impact we expect to see in the market?
Tenants are really going to be spoilt for choice in 2016. With a huge number of units set to complete by this year, difficulty getting loans approved, and interest rates going up, many cash-strapped owners are already offering much lower rentals to cover part of their instalments as they “tough it out” for the year. Over the next few months, it’s likely that more and more units will be rented out at lower prices as landlords face the tough choice of renting out for less or not at all.
Tenants should take this opportunity to lock in the rental prices at an attractive rate so they don’t end up paying more when the market goes up again.
Many of the units completing this year come started in 2013, where the Developer Interest Bearing Scheme (DIBS) sparked a big wave of speculators who bought properties expecting to flip them upon completion. In 2016 with tightening loans, rising interest rates and demand dropping like a rock, these speculators are now in a desperate position.
Some of them may have bought multiple units only to find no buyers even at break-even price. To avoid bankruptcy, some of them are going to choose to sell much lower below cost. This is why cash-rich and savvy sub-sale investors can find really good deals in the market now, and we expect the trend to continue well into 2016.
On the developer side, many developers are freezing new project launches and just looking to clear their current stock at rock-bottom prices. For bargain hunters, now is the time to negotiate and get a good deal.
Banks across Malaysia are now basically over-leveraged in many of the hottest property spots in Johor & KL over the past 3 years. Many of them are swinging to the other extreme. Bank Negara, as well, has issued a set of guidelines for banks that urges them to lend conservatively during this period of time.
Estimates put the loan rejection rate in 2016 to be as high as 50%, meaning 1 in 2 loans applied in 2016 will be rejected. On a side note, many banks now are imposing stringent limits on foreigners trying to take loans, even Singaporeans who traditionally can get 80% now may have to settle for 70 or even 60% with stable income and good credit history.
Everyone needs a roof over their heads right? Over the past 3 years, as market over-heated, developers built increasingly high end luxury condominium projects that became way out of reach for the average Malaysian. There’s a growing voice in the Rakyat that Malaysians can’t afford property in their own country!
Realistically speaking, most home-buyers don’t need luxury apartments, which typically cater more to expats, investors and a select portion of upper-middle class. An oversupply of luxury apartments can’t really affect this demand, as even when prices come down, it’s still typically too high for many Malaysians to consider.
This is why properties that are affordable in prime locations are getting sold out very fast, and we don’t see the trend slowing in 2016.
With the sudden and dramatic drop of the ringgit, many people predicted that foreigners would have come in mass to snap up properties. Unfortunately, this surge of foreigners did not come to pass. The ringgit is predicted to remain at current levels for 2016 as oil prices remain low and interest rates are set to rise globally.
Foreigners looking for bargains usually will wait for signs of recovery before committing to their investment, as they are not as sure about the market as locals can be. To add to that, the government is actually getting stricter over their foreign property investment policy, not less From the looks of it, it looks like 2016 won’t be that year foreigners will save the market.
Wait. What? Why would new property prices still go up when there’s no demand? The thing is, with the implementation of GST and ringgit depreciation, construction costs have been rising substantially for many developers. Until now, they have been working very hard to keep prices down just to move units, but for new launches, they cannot afford to sell below cost.
Unless we’re talking about the high margin luxury apartment market (which has demand dropping like a rock now), they don’t have that much margin to play with. Furthermore, it’s usually expected by prior purchasers of a project that prices will increase when the project nears completion. If the developer risks dropping prices, they’ll have to take a hit to their reputation. This is why for new launches; we still think developer will choose to launch at higher prices even in 2016.
Enjoyed our analysis of predicted trends in 2016?
If you want to get started on your property investment journey, is stuck (because of LTV) or uncertain how to proceed, then this is for you.
If you’re ready to get started in property investments, or you want to massively grow your property portfolio in 2016, come and meet up with Malaysia No 1 Property Coach, Kaygarn Tan at the Property Success Mastery Workshop in 2016 event.
More info at http://propertysuccessmastery.com/
Kaygarn will be elaborating more on the property market for the year. He’ll load you up with proven powerful property investment strategies. And more importantly, he will share with you how to achieve more in your life through buying properties with No Money Down.Register NOW at http://propertysuccessmastery.com/