Tuesday, May 20, 2008

It's global, the slow down

Just got back from a trip to London. While I was there, news about Caroline Flint, the UK housing minister with shocking notes revealing the downturn in the property market made the front pages... (http://www.guardian.co.uk/money/2008/may/18/property.housingmarket) You got to respect the British journalists. The poor minister was going to meet British PM Gordon Brown and the journalists photographed her handwritten notes from afar.

During the stopover in Bangkok however, news reported that property developers were preparing for up to 5% price hike to cover for increase in material costs (http://www.nationmultimedia.com/search/page.news.php?clid=6&id=30073374). As I am familiar with the real estate market in Thailand, I can tell you that it is not so hot at the moment. While the rental market remains steady, subsale has slowed down tremendously. Prime units on sale since September last year is still in the market looking for that elusive buyer.

My opinion is, no matter how much property has appreciated, the appreciation means nothing if there are no buyers. Few months ago, I was dismissed as a doom-sayer. Today I have the satisfaction of being witness to high premium units such as Meritz, Hampshire, Stonor etc. entering the market after apparently appreciated to almost RM2000psf, many speculators are sweating as they struggle to flip their units.... mortgage interests payments are starting to kick in. While some may argue that most of these buyers are foreign cash, still a sizeable chunk are local speculators with little fundamentals to back them up. Get ready for a cheap sale...


The Great Game said...

For those intend to bottom fishing, the next question is how much will these KLCC properties come down?

To 600 psf, the price at 2005/06 level if I am not mistaken or even less?

For a pure rental yield perspective, I cant see how these units could fetch more than 3k per month (said a 1000 sqf unit) which translates to 600k (or 600 sf) at implied 6% gross yield; the supply is just simply too abundant, where I could too little demand to justify it!

sinleong said...

i doubt we will ever be able to see RM600psf again for KLCC area. the cost of materials and land prices... unless we have a fire sale. even if bank auctions them, the banks would not set it too low below market. i've seen this happen in Thailand in the 97's. the banks would rather not sell and wait - the loan defaulter still bears the responsibility on interests accumulations anyway?