Home Prices to Fall as Recession Hits in 2018

In light of the recession set to hit Malaysia by 2018, economic affairs analyst Prof Hoo Ke Ping expects prices of medium and high-end residential properties to fall as it becomes harder for property speculators to secure bank loans, reported Free Malaysia Today.

Since 1960s, the country has witnessed a recession almost every decade, noted Hoo.

He revealed that the recession in the early 60’s was caused by global rubber prices, by the ringgit crash in 1967, and by global rubber prices in 1970. The recession in the 80s was caused by a property crash and outflow of funds, while that in the 1990s was due to a currency crash.

“In 2008, we experienced another recession but we managed to pull through very quickly. The 2018 recession is expected to hit almost all sectors,” added Hoo.

With this, the next two-and-half years may be the best time to acquire a medium to high-end home.

This is because the property market had begun to show signs of easing six months ago after speculators failed to secure tenants or buyers or bank loans for their properties.

In fact, a condominium unit priced at RM500,000 in 2012 is now going for RM420,000, while some homes are almost RM100,000 cheaper, said Hoo.

He attributed the hike in property prices to Bank Negara’s delay in curbing property speculators from acquiring and selling homes under the Developer Interest Bearing Scheme, in which the “willing buyer willing seller” concept is exercised.

In 2012, Bank Negara finally introduced stricter regulations on market speculators. The delay, however, had resulted to a property bubble with artificially inflated property prices.

As the fake demand spurred developers into building more homes, around 1,000 houses in Penang, 3,000 in Johor Bahru and 6,000 in the Klang Valley would be left vacant.

To overcome the fake demand, Hoo urge Bank Negara to tighten bank loans for property developers in order to force them to sell completed housing units at a cheaper price.

“Most of them built the properties in 2013, when the prices were still inflated. Even if they sell the remainder of their unsold units at a cheaper price, they will still make money.”