"Malaysia’s property market is moving into an oligopoly market structure and experiencing a supply-corrective cycle in 2018," said Yap.
THE term “property market crash” generally refers to a significant drop in property value, a situation in which market suppliers were losing their price control power leading to a panic sell in the market, according to IQI Global head of marketing team and Bricksmen Group co-founder Tony Yap in a statement.
“The most pathetic thing is NO BUYER even when the price is reduced drastically,” he added.
Recently, an article quoted property veteran Ernest Cheong with a prediction that Malaysia’s property market is going to crash next year sometime after Chinese New Year in February or later. The situation is because the consumers are losing the financial capacity to own a home and are failing to serve the mortgage. He expected the housing prices to fall from RM500,000 to RM300,000.
In the meantime, Bank Negara’s quarterly bulletin reported that unsold residential properties had reached its highest in 10 years, together with the government move to freeze approvals for luxury developments, leading the market to ask the question: Will the property market crash in 2018?
In response to the above question, Yap disagreed with the prediction of a market crash. On the contrary, he expected Malaysia’s property market is moving into an oligopoly market structure and experiencing a supply-corrective cycle in 2018.
He explained that market structure refers to the contestability and the number of suppliers for a single type of product. There are four types of market structures, namely perfect competition, monopolistic competition, oligopoly and monopoly.
The market structure is defined by the level of competition and entry barrier in the market. A perfect competition market is the most competitive and an easy threshold to enter the market. A monopoly market is the extreme opposite of a perfect competition market: It is the least competitive with the hardest entry barrier.
“From 2008 to 2013, Malaysia is in a monopolistic competition market. It offers a lower threshold to join as a property developer, as long as you have few millions on hands. And almost everyone can own a property during that time,” he explained.
However, the local property market is shifting into oligopoly model since 2014. Following the implementation of property cooling measures by the government includes the demolishing of Developer Interest Bearing Scheme (DIBS), tightening of loan approval rate and the imposing of Real Estate Property Gain Tax (RPGT).
“The number of suppliers or developers in the market reduced due to the cooling measures, yet, the price control power increased.
“Under this situation, buyers are having difficulty in finding substitute products, developers have hence become the price setters, leading to an oligopoly market,” said Yap.
He also pointed out that before 2015, most of the properties in Malaysia had been selling above the bank’s valuation price. During the period between end-2015 and early-2016, the same properties had transacted as per bank value price.
According to Yap, that is a price-correction rather than a price-fall cycle.
“Now we are at the peak of supply corrective cycle. Besides those cooling measures, the amendments of Housing Development Act, Strata Management Act and Strata Titles Act had further decreased the supply of secondary properties and new development projects in the market,” he said.
“Together with the government move to halt approvals for shopping malls, offices, serviced apartments and luxury condo priced above RM1mil, it will balance the property supply-demand, pushing the market into the end of this cycle. Eventually, there will be no more oversupply issue,” said Yap.
