Where is Malaysia now in the property cycle? Is Malaysia in the final years of the upswing of the property cycle? How long more will the cycle remain robust? Malaysia property prices have been rising since 2010 fueled by easy credit, low interest rates and high demand on the back of strong economic fundamentals. The projected super cycle that will bust in 2012 did not happen. Prices continue to rise.
It was only in 2013 that cooling measures were introduced to slow down the rising prices. Even with the cooling measures, volume of transactions has reduced in 2014 however prices remained high.
The prices till to-date are still on the rise. Thus the recent tougher credit checks on potential buyers and lending curbs imposed by Bank Negara comes as no surprise. When the going is good -increasing prices, please exercise caution.
The investments must be of good value, based on basic fundamentals, current earning, and current rental yield, not potential for capital gains and not dependent on rolling over loans. In the 18-year property cycle, we call the final two years before the cyclical peak the “Winner’s Curse”. You may make some investments that realise gains for the 2-3 years but when the cycle turns down you may soon find you are holding assets worth less than what you paid for them.
We caution not to be influenced by the herd mentality. Just be patient and don’t be fearful of missing out. Not easy though we know. Review your portfolio of investments and make sure its value is protected. The last couple of years into cyclical peaks – when things are overheating – are definitely a good time to dispose of the less attractive investments in your portfolio. This will help you to build up your cash reserve in anticipation of the many good deals coming your way when the cycle turns down.
As the cycle turns down, there will be plenty of investors that are over-leveraged or distressed and in need of cash. This is the time when good assets are available at good value. Furthermore, in a downturn there will be fewer investors, so less competition to bid up prices. The best deals are available at the bottom of the cycle. If you have a strong cash position you will be in a position to snap them up. However it is also at this point that there will be plenty of negative news around to tell you why you shouldn’t do it. This is a counter-cyclical approach to investing.
So when will the price bust? Will it be in 2015 or 2016 or will it continue to rise yet again?
The answer lies in the 18-year property cycle. Find out where we are in the 18-year property cycle in the Property Millionaires’ Secret Clock.
Check out www.propertymillionairessecretclock.com to learn more.
「If this article is useful to you, feel free to buy me a coffee ☕」
Danny KO @ RPC
If this article is useful to you, feel free to buy me a coffee ☕
