SINCE the high-end condominium market took a beating following the global financial crisis in 2008, their values have been left pretty much battered even today. Investors who got into the market around the peak must still be quite disheartened by the market’s lethargy.
The big supply coming onstream has also been a dampener on property values and the rental market of these residences.
There are now many condominiums in need of tenants and the net rental yields are in the range of 3% to 5%, depending on the location.
But despite this, the speculative fervour in the upper-medium to high-end landed residential sector has not abated. There are signs that it is spilling onto the latest craze – small sized, and more affordable, commercial cum residential accommodation known as SoHo’s, and service apartments.
It is time to exercise caution on property matters to ensure the market’s sustainability and avoid unnecessary losses.
The fact that even analysts are concerned and have downgraded the property sector pretty much indicates the party is coming to an end and it is time to be cautious.
UOB Kay Hian Research has downgraded its grading for the property sector to “market weight” from “overweight” citing that the property valuation cycle has peaked.
A global double-dip recession, coupled with the European debt problems, would certainly have spillover effects on the domestic economy, including the property sector. If the world economy is hit by a recession, the property market will not be spared either.
The recent market volatility and sell-off has affected investor confidence and the market is taking a breather now.
Although the market seems to be holding out quite well for now, there is no telling how it will react if sentiment is badly eroded by the gloomy external outlook.
As such, developers should also be cautious and build more affordable property units priced below RM350,000 that still has strong demand.
As shown by the havoc caused by the oversized property bubble and sub-prime loan crisis in the United States which literally brought down the world economy to its knees, we have witnessed how significant a role property has on the health of the economy and financial system of countries. The world would have been spared the agony of the global financial crisis and the continuing state of volatility and uncertainty had the United States been vigilant on its crumbling market fundamentals that inflicted such gargantuan damages felt till this day.
For the sake of a sustainable property market in the long term, it is important to have policy measures that will ensure the market is closely tied to market fundamentals, and to curb any artificial inflation in property value.
The more that is known of the fundamentals, the better and this calls for greater transparency.
By LIVING MATTERS
By ANGIE NG