Since the start of Year 2017, we see so many conflicting predictions as seen from the many headlines in the local dailies of where the market will be for 2017 and beyond. Depending on whose perspective they are coming from i.e. developers’ or buyer or seller’s, their predictions may seem biased to some. So what do you see of the market?
Let’s review the property from a neutral basis based on facts.
A nationwide jump in the property sales in year 2011 that lasted till 1st half of 2016 has been arguably the greatest driving of health in the property sector, with double digit growth continuing on the strength of new closings. As Napic, comprehensive statistic, reported a quarter-over-quarter climb in the rate of purchase. While values continued to climb and property transactions and confidence remained high, this boom in purchase rates seemed to decelerate some at the close of Q3, 2016.
Taking all this into account, the many negative sentiments in the market notwithstanding the influx of China developers, the depreciating of the ringgit, foreclosures and retrenchments increasing, household debts remained high and bank loan tightening, we quickly see a shift from a seller’s market to one more favourable to buyers. As a general timeframe, most developers seemed to be reporting a slowdown in sales around. While this is seasonally typical, it also seems bolstered by a variety of other factors.
Chief among them seems to be the decline in affordability. As reported in the various local dailies, prices have risen so drastically that they are rendering purchase unfeasible for a large portion of potential buyers.
In tandem with this, it appears that developers and agents reported a much lower transactions rate. Developers are now offering many incentives to lure customers and changing their products offered with a much higher density and a much smaller unit with price per sq. ft unchanged or slightly lower if any.
So What about Buyers?
Depending on economic performance in 2017 and Napic report for Q4 2016, we might see a further drop in both transactions volume and prices, in home prices. The impacts from this are multifaceted, but not necessarily negative. The combination of elevated prices and loan tightening have caused certain homebuyers to shy away from closing on new property, which might cause problems for property developers and those holding real-estate backed funds.
However, it could also cause a general easing in property values, which might result in decreases that are good enough to encourage shy buyers back to the field. Generally most homebuyers are very cautious and take a longer decision period to commit in a high ticket item in a slow market. The question we have to consider is have our property market reached the bottom? How long and when this pattern could ultimately mark the beginning of stability in the housing sector?
Based on past statistics, property market generally does not slump overnight. It is a gradual process over years. Vice versa after a market downturn one would not expect the economy/market to change overnight as it generally takes years for the gradual rises and stabilizations in real estate values that match similar inclinations among buyers, then we could see the housing market reach that fabled plateau.
Looking at the broader and longer perspective, i am of the view that i see a buyer’s market in 2017 and do not expect the market to rebound immediately in the near future.