2018 Property Market Outlook – Part 2

2018 property market outlook – Crash? Stable?

2018 is 8% over. So far, I shared some of my point of views regarding 2018 property market outlook.

  • We are in buyer market;
  • Challenging time to Sell Off property
  • Rental market remains stable but experience low rental yield market.
  • New Technology lower the Demand on Shop Office & Office Space
  • Digital Free Trade Zone will boost up the Demand on Retails and Shopping malls

Read 2018 Property Market Outlook Part 1 here

Meanwhile, there are group of people who predict property bubble or market crash in 2018. These people worry that market will another year of 1998 – year we were experiencing Asia Financial Crises – increase number of abundant projects, limited property transaction, all sellers but no buyers and sudden price drop on property price. So, will these happen again?

To find out the answer, it is important to analysis how globally and our country economic performed in 2017. Keep it short and simple, I refer to an article wrote by Director of the Asian Research Institute of Banking and Finance, Universiti Utara Malaysia and Visiting Research Fellow in Islamic Finance at OCIS, Oxford University (Read it) and summarized as following:

  • According to Malaysian Institute of Economic Research (MIER) analysis, Malaysia may arrive at the high-income status as early as the first quarter of 2018.
  • The consensus forecast for Malaysian economic growth in 2018 is within the range of 5.5 to 5.8 per cent, with the prospect of stable inflation and low unemployment.
  • For the first time since the great recession, the world economy is projected to grow at more than 2.5 per cent next year.
  • The United States and the rest of Europe are expected to turn in an average growth rate of two per cent in 2018 while China, despite its slower than expected growth rate, is still a major force, with an economic trajectory of around 6.7 per cent next year.
  • And without a doubt, the recently unveiled 2018 Budget, touted as the “mother of all budgets”, will further boost the Malaysian economy as we approach 2018, especially the people part.
  • The government is set for the future beyond 2020 with the Transformasi Nasional 2050 (TN50) vision.
  • With the launch of the Digital Free Trade Zone (DFTZ) this year, 60,000 high-income jobs are expected to be created primarily for the youth.
  • International reserves now stand at US$102.2 billion (RM416.97 billion), which is sufficient to finance 7.5 months of retained imports and 1.1 times short-term external debt.
  • Ringgit is strengthening; Malaysian currency is now performing well below RM4.00 against the US dollar.
  • The 14 Malaysia-China business memoranda of understanding (MoU) and the 31 Malaysia-India business MoUs for instance, are expected to bring about RM302.4 billion worth of investments into Malaysia.
  • And so on.

Wow, it sounds we are going to have a great and encouraging year in 2018. Is it too good to be true? The answer is back to you. Regardless what your answer is, asked this question:

“What will happen if property market really crash like 1998 financial crises?”

During property market crash, there tends to be a negative impact on economic growth. One of the consequences of property market crash is low economic activities which lead to less consumer spending, high inflation rate, unemployment will growth, household income will reduce and lastly low economic growth. Majority people will be suffered.

So, the next question is should I worry on property market crash?

People who are not financial educated as well as financial prepared. Their property may force selling. And it is not surprise that they had to rely on government support or increase their debts for maintenance their living. The worst scenario is they become jobless and homeless and even bankrupt.

However, those who are financial educated and well prepare are not worry. In contrast, they shall happy. It is because they can now purchase discounted property and increase their sizes of property portfolio by borrowing more money from others.

So your answer is depends on which side you are standing.

Third, what actions should be taken during property market crash?

People who are not financial prepare and lack of financial education, the worst scenario is force selling. They need to work harder to payback their debts. They spend lesser time with their love one. They work longer hour and reduce their sleeping or family time to earn extra money. Their life will remain unchanged if they are not willing to enhance their financial education.

On the other hand, people who are financial educated are having different experience. Refer to Warren Buffett’s famous rule: Be fearful when others are greedy, and be greedy when others are fearful. They are using this golden opportunity to change their life. Lower class is given opportunity to upgrade to middle class or rich or super rich. Middle class is given opportunity to upgrade to rich or super rich. And rich is become richer or super rich.

Yes, I admitted that it is easier said than done. And my way to make easiest to achieve is not to be too greedy. I don’t set a high expectation and aim for huge profit. As long as there is rooms of earning, I‘m happy; it is not necessary to wait the price drop to the bottom. Takes a small step for each opportunity, you will found your life and financial status become better and better.

Now, the opposite side of coin ask this question: What will happen if property market doesn’t crash?

There are two possibilities – it may either remain flat or boom. The possibility of property market boom is very limited due to current market situation – oversupply and supply mismatched. So, property market is high possibility remains flat and stable.

More discount will be given by home sellers – developers or desperate sellers – especially there are so many unsold units especially luxury property in market. Property price remain stable and more properties below RM 500,000 will be launched. Indeed, there is no much changes compare to previous year.

Next, what action should be taken if property market remains flat and stable?

If you found yourself lack of financial educated, perhaps it is time for you to improve it. If you not willing to do so, there are not many changes on you in coming year.

If you are financial educated, I believe you had planned for it, just the matter of execute. Follow your plan, and ensure there is always a backup plan for you.

Read 2018 Property Market Outlook Part 1 here

Lastly, I am not economics professor who have sufficient knowledge and resources to predict how economic will be performed. I am not financial expertise that could analysis all the data and tell you what will happen next. I only am a small and tiny player in Malaysia property market. So, instead of worry on the property market crash, it is better to be a financial educated investor. Always prepare for the worst and wish for the best.