Property Bubble – A Fact or An Opinion?

Alicia November 6, 2019March 25, 2025 0 Comments Landlord, Property Investment

As we all know, Malaysia’s property market at the moment is currently as slow and sluggish as a snail. How so?

Picture this.

You have a train that delivers food and drinks to your customers. The supplied amount isn’t enough, so you increase the supply when the train comes back. Rinse and repeat. Eventually, you just decide to make double the usual amount.

This time, it’s just right.

Then you think, “Maybe I should just make sure to have extras, just in case they want more.”

So instead of making 2x the original amount, you decide to make 3x the original amount.

But this time, it’s too much. Before you know it, you have an excessive supply and not enough customers.

Oof.

And you aren’t the only supplier. There’re other suppliers too.

This results in what we call a “housing bubble”, where at first there was limited supply and you seek to meet the demand. But in trying to meet the demand, you did too much and now you have way too much supply. The market as a whole is affected, and there is now too much supply, too few people that can afford to buy the supply.

It’s a temporary event but can last for years When the “housing bubble” bursts, the prices of homes usually decrease significantly as well.

Expert Ernest Cheong has stated that the SST is unlikely to affect prices and the sale of property. The main issue is that many people cannot afford to buy homes.

Many people cannot afford to buy homes due to the issue of income. A single, working professional living in Kuala Lumpur needs an average salary of RM2,500 – RM2,700 to sustain his or her living. If that is for a single individual, what more for families?

A house in Selangor costs about RM479,894 according to the Global Property Guide in 2019. If someone is earning a salary of RM2,700, it would take him or her 177 months or 14 years to be able to purchase the house as per the current price.

It is commonly known that the current income doesn’t match up to the cost of living in Malaysia which has increased over time.

So it’s not that there is no demand for houses, but rather, people who want to buy houses are in tough situations and/or there are external factors. Here’s some of them.

They have a bad credit score and don’t know how to fix it
They’re (already) in debt
Their income doesn’t match up to the cost of living. Some people’s income might just be enough to cover living expenses but not enough for savings. Or, they can’t even cover their own living expenses.
Spending too much on things they want instead of according to their needs (e.g: impulsive buying, compulsive shopping)
Not keeping track of their expenses and not budgeting which leads them to spend too much money without knowing.

For most of these reasons, it boils down to a lack of financial education which leads to bad financial decisions. It can start out really innocently. How? Like this.

Let’s say you’re a coffee lover. You always get yourself a cup of Starbucks everyday.

That cup of coffee costs RM15, and you get them 5 days a week.

Weekly coffee expense: RM15 x 5 = RM75

Now…a month usually consists of 4 weeks, so:

Monthly coffee expense: RM75 x 4 = RM300

Multiply it by 12 months, and…

Yearly coffee expense: RM3600

Surprising, right?

Imagine yourself getting out of this coffee habit. You’d be saving yourself RM3600 per year.

It’s hard to believe that these little things add up, but they really do. Even little things like regularly going to a cafe for that cake you love so much. Or buying that fabulous tins of biscuits for yourself. Then there’s also all the sales (which we all love) during Chinese New Year, Raya, Deepavali, Christmas…

We should keep in mind though, that these things add up. Get a notebook and start documenting our expenses, keep the receipts and tally them up… Or even use an app to keep us on track and financially healthy.

Property expert Ernest Wong believes that the housing bubble will burst when banks can’t afford to hold on to current prices and inventory, and banks can’t sustain the loans. He gives an estimate of after 2019.

IF, that is really the case, it’d be good to save as much money as possible to take advantage of the opportunity when the bubble bursts and houses become cheaper 🙂