Already MOST unaffordable but prices will continue rising?
by Charles Tan
Which is the most unaffordable property market in the world today? Hong Kong. Who said so? US-based Demographia based on their survey. According to them, Hong Kong’s median hoe price was more than $S4.02 million compared to the median income which was only HK$270,000. Few weeks ago, Malaysia was said to be severely unaffordable at 5.5 times. (Median income to median house price). For Hong Kong, this is nearly 15 times. How should we label them? If you think due to this, Hong Kong is poised for a bubble bursting, think again. According to real estate professor Eddie Hui Chi-man of Polytechnic University, property prices would continue to increase for the next 2 years because new housing supply will not increase significantly until 2016. This is based on statistical numbers. He said, ‘It’s impossible for salary income to catch up.’ One key reason was because the government did not increase the land supply and the Home Ownership Scheme for flats was only restarted in October 2011, after a 9-year absense.
How expensive is expensive? Well, in Hong Kong, due to the extreme high prices, the new flats being ordered these days can be as small as 160sf!! Yes, 160sf. Demographia said for housing to be affordable, the house prices must not exceed three times the median salary. Anything higher needs intervention from the government with respect to the land supply, infrastructure planning, provisioning and financing. I think this is already being done actively by Singapore via its HDB programme. In terms of success? Well, perhaps due to this, Singapore’s median home price is still at 5.1 times versus gross annual median household income. Without the intervention, perhaps Singapore would be closer to what Hong Kong is experiencing?
Personally, it’s not hard to understand when the population is increasing and the land size remain small, the prices go up. However, another reason why prices go up may also because of the sudden increase in demand while supply did not increase fast enough. Thus, when supply catches up, the prices would stay stagnant or even decrease. However, when it is not an island why do house prices increase? The main reason is thus the popularity of a certain area versus others. It’s not even necessary be close to the city centre! Just that feeling when you are driving in your neighbourhood. Thus, it’s much harder to control these ‘emotions’. That’s why prices will continue to increase for popular areas even when more affordable units are built. In fact it will increase until everyone who can afford them has bought one unit somehow or somewhere else. We shall see. Happy buying, OBJECTIVELY.
>> This opinion article comes courtesy of Charles, the founder of kopiandproperty.com. He is popular for sharing his thought on property investment mostly based on his own 11 years experience as well as from all the readings and conversations with property gurus in the industry. (Source)
Is nuts to compare HK and Singapore properties price vs Malaysia.
I would advice people to ignore this article as it is as meaningful as saying nothing.
u r comparing a island with malaysia?
y not just comparing HK, SG with PG?
I know it’s just a typo but…. I didn’t know cangkul cost that much in HK! 4 million dollar hoe? Haha! (sorry couldn’t resist).
I do agree with Charles though, it’s all about supply and demand, and what people holding powerful position manipulate this supply and demand.
I do think Penang desperately need better public transport to increase population density though. I’ll happily jump on a bus if it means I get to work as fast as and/or cheaper than driving to work myself.
@Chris
Why do you want a better public transport to increase population? We should wish for a better public transport and yet maintain the population density, so that buses/monorails won’t be cramped, and you can travel from one point to the other without having to drive.
So many nuts posting thier view here.
Another nut posting here to say “so many nuts posting their view here”
Pricing is moving….generally due to “Demand/Supply Curve”.
So even in current slow economy but if there is strong demand (that may include speculations), price still go up.
Then why have demand?….because of Location, Location, location.
Why the old school of “Locations” important? Because of FUNDAMENTALS (eg, near Jobs in FTZ/banks, good schools, good connectivity, near popular shopping complexes (eg QB, )……but recently RUMORS/UPCOMING DEVELOPMENTS too can play important role.
Simple questions, scenario analysis, how much price can drop in area like Green lane, Island Glades, Sg Nibong, Sg Dua even if there are property gluts?
Of course above are not the only factors but certainly one of the major factor.
Good one! Thumbs up for you!
I am one nut with a nutty idea that might not be popular with everyone.
One reason is that population will increase, either concentrated in Penang or spread out to nearby suburbs. Either way, people will still flock to the island for shopping or what not, unless Batu Kawan makes the island obsolete.
So maybe I should rephrase, public transport is needed to handle future population.
… and I secretly wanted to see 1 million people living on the island. Nut indeed.
@WF
Actually the economy is not slow, it’s only the housing market that is slow. If you look at GDP growth, it’s pretty much the norm. So, with normal GDP growth, people are only enjoying normal income growth. But housing price has been going up at an abnormal rate in the last few years. So something has to correct itself to have a balance.
Rumours/upcoming developments surely have their roles in affecting housing price, but at the end of the day, price will have to converge with affordability. Oh by the way, speaking of rumours, I just received one. Pr1ma will be launching 3000 units of 1200sf condos in Bandar Baru & south island selling at RM250psf. Quality will be something like IJM’s Summer Place. If you’re qualified, then good news, 110% loan.
@Chris
Batu Kawan will not make Penang island obsolete, especially the trendy areas. Batu Kawan is meant for people who earn an average income, who still need to travel to Bayan Lepas or BatuKawan Science park to work. Sg Ara & Relau could be obsolete as an affordable residential kampung, replaced by Batu Kawan.
1 million population on the island is not that far away. Penang Institute already show that there are about 800K in population on the island.
Rational fact why property price increase would be the same thing why everything increase in price … inflation. Petrol increase = sugar increase = wages increase = teh tarik price increase = commodity price increase = professional’s salary increase = engineers & technicians’ salary increase = land price increase = construction cost increase = more expensive properties. You want to be delusional and buy property price the same as 1990? Then ask all other industries and price to revert back to 1990 pricing … and you take a pay cut back to 1990 salary as well.
u already point out clearly……1 million living on the pg island….back to basic..what is the population for Singapore? They want to increase to 6million from 5million++ in short term. What is the population for HK? 4/5 milion and there is 2 to 3miliion tourist in the island all the time (Sry figure might be wrong for HK).
This author wrote this for one purpose: Pursuing Malaysians to accept higher price in order to let the developer keep increasing selling price … even it is over our limits.
In short, Charles Tan stands for developers.
I do agree with your points to certain extend,
nowadays buyers/investors seems to be very much addicted to the “new supplies”, then many seems forgotten about real demand. Obviously new and more and more condos which are piled up vertically with non-stop supplies, like Ken mentioned another 24000 (excl low, medium affordable apt) coming to island market by 2018.
But new landed house supply drop a lot despite the strong demand. If developers to build more landed properties in this Eastern side, the landed property increase can be slowdown but the profit margin on condos would definitely sweeter for developers.
The market shall re-balance itself later I guess….
@WF
Buyers are addicted to new supplies because there is an “unspoken” understanding between buyers and developers that the developers would help to “fry up” the price later when the projects are completed. Therefore creating a situation in Penang whereby price is high, but no transaction. If the authorities still keep a blind eye on this, innocent buyers will continue to be duped by the developers. I don’t expect to see any tough measures against these developers in Penang based on rocket’s cosy ties with them.
There’s no way everyone can be pleased at the same time.
On one extreme it’s a total free market, profit/supply & demand driven; On the other hand it’s state housing and rent control.
I honestly don’t know which one is better for everyone and the state. But comparing Hong Kong to Singapore I definitely prefer Singapore.
Penang island could easily handle more population, problem is moving them about and quality of life of high density living. Looking at the map you’d think even Teluk Kumbar can handle 100k population living in apartments, but if everyone drives, nobody can leave the area in time to go to work.
Unless transportation is handled, a lot of area doesn’t work as a bedroom community.
Yeah….that’s points I had highlighted earlier…. go back to basics “location,location, location” and fundamentals.
Like what you mentioned High density, quality of life, transportation are linked to above principles. Then which school are you sending your children to?
Sometimes it defy my logic of buying/investing in far corner of the island, yet not cheap but of course “new” properties addiction.
Rather than choose a mature and secure locations. Then some condos maintenance fees too are quite high.
Don’t forget that petrol price would be free float (further you stay, the more you pay) and assessment rate increasing….
@Chris
Haha, you are right, it’s not easy to please everyone. That’s the headache for every gov. That’s why people came up with a democratic process whereby the majority gets what they want.