Will property price and rental fall further?

In Johor Bahru, recently there is a rumour in the market and among property agents that property prices will start to drop further after Lunar New Year. Don’t know how much true this has and what is the basis of it.

Since Sep we noticed that prices of most high-end properties like condominiums in JB have dropped quite significantly (10%-20%). This is because those units previously held by developers are now on fire sale. Most developers are now facing liquidity and credit pressures from banks or contractors as everyone in the market is now trying their best to secure cash.

Some developers for the middle-end condominiums have also started to appoint agencies to sell their units below market price. Previously they just relied on their own sale office and staff to sell these units. Suddenly the market is flooded with more supply of properties from both developers and home owners.

Maybe another good news to investors and home buyers – now banks also join the fire sale team. Number of auction properties has increased since early of the year. According to auctioneers: MORE to come next year!!

One side of the market is confirmed – supply has increased.

What about the demand – like rumours in the market, to wait after Lunar New Year? According to some agents, they have received more enquiries on rental properties for investment purposes since Sep. However, they are just enquiries only.

Rental Market
On the other hand, rental rate are expected to increase in Johor Bahru. People are holding back large and unnecessary expenses in this uncertain period. More people will prefer to rent first until they feel secured with job markets (Malaysia and Singapore) and their savings.

Banks (again..) are now more stringent in approving loan and forcing more home buyers to defer their plan. Imagine, when you apply for loan now banks will start question how long you have been serving your current employer and the business nature of your employer, in order to make sure you have “stable and secured” income, etc, etc….

Expectation on rental hike during this tough period due to the above reasons may be the explanation why there are more investors enquire for rental properties recently.

About The Author

ongkl

Coming from a humble little town named Tangkak in north Johor state of Malaysia, I am so lucky to have chances to learn and work both in Johor Bahru and Singapore - a conurbation with 6.49 million still fast growing population - since year 1996. Hope now I can have a chance to contribute back to the community by sharing what I see, what I know and what I learn in this wonderful place.

3 Comments

  • KCLau

    Reply Reply December 17, 2008

    I think your explanation about the rental market applies to the market in KL and Penang too. Isnt’ it?

    • ongkl

      Reply Reply December 18, 2008

      Theoretically, yes, rental markets in KL and Penang are expected to see the same thing happens.

      But there is one factor in JB rental market that KL and Penang markets do not have – Singapore. Within the next 6 months, Malaysian workers retrenched by Singapore firms will flow back to rent houses in JB while they look for new jobs. This may temporary creat another influx of tenants to JB. The strong Singapore currency will also attract more people from the north to come and find job here in long term, just like what has happened in the last 1997 Asian currency crisis.

      Cheers
      (Today S$1 can change for RM2.4)

  • KCLau

    Reply Reply December 18, 2008

    This is the special effect that’s happening in Singapore.
    Penang only depends on the hi-tech MNC investment here. If they are going to retrench their staff, demand of the local properties may drop, regardless of rental market and buy-sell market.

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