Tuesday, May 24, 2011
Do We Have a Property Bubble?
As an investor, I should obviously be pleased with the prices of properties we see today. However, I feel suspicious more than pleased... About 5 years ago or less, we were looking at studio apartments in the city center being priced below RM200k for example a 350sf studio in Casa Mutiara was going for RM180k. 2-3 bedroom units at the city fringe such as Titiwangsa Sentral at Jalan Ipoh were going less than RM300k. This gives many junior executives with a salary of around RM3500 and below an opportunity to purchase a property to invest in or to live in. But today, city properties have now appreciated in most cases 100%. However, salary remains the same and rental income has not really gone up a great deal. And in the case today where some areas are witnessing a glut, rental has indeed dropped. So, what was once an 8% to 10% rental yield investment has become less than 6%.
What more surprising is even new launches at far flung ulu places like Shah Alam are selling 665sf studio units at RM330k and above! The project with the floor plan below will be managed by Best Western and comes with a Guaranteed Rental Return over a specified period. Then we have got the Eves Suite launching in Ara Damansara from RM360k for a 680sf studio unit! Ara Damansara is a good area. But RM360k???
Do we have that many people with this kind of disposable income to invest? And not to mention the tenants to pay that 6% yield these punters are asking for. With a RM330k investment, one is staring at a RM2000 monthly installment. So, only those with a salary of RM3500 and above are going to be able to afford. I won't be surprised that punters like us with already a few properties in our portfolio are those who can afford to go in. So yes, there may be some buyers, but where are the tenants?