What Caused the Serious Price Increase in Properties from 2009 to 2012?

The year 2013 is widely seen as the year when property prices are expected to rise due to faster and higher pace of inflation as well as rising commodity prices. With the election finally behind us, many property buyers are beginning to reassess their next move.

Residential properties will still do well in terms of numbers. For certain areas, prices will increase. But overall for this year, there will be an adjustment in terms of prices, which are expected to moderate. The property prices in Malaysia will continue to rise in the coming months, but at a slower rate possibly in single digits.

What has actually caused the serious price increase over the short span of time to the level we have never seen before, is low interest rate. The lowest BLR in Malaysia was logged in 2009 at 5.55% and the highest level was 12.80% in 1984. Taking this into consideration, the average BLR in Malaysia for the past 28 years is about 8%.

There is one very important point to be highlighted here, as housing loan interest rates used to be calculated by adding bank rates on top of BLR. For instance, BLR 2003 was 6% and most bank mortgage rates were BLR + 1% thus making the effective lending rate as 7%. This was a common practice in Malaysia until 2007 when some banks started to minus from the BLR. I know it because I was surveying a home loan in year 2007, and the rate was -1.25% off BLR.

Although not as common today but it was the beginning of the low interest rate spree that we have never seen before in history.

My Tips
Anyway, try to go for the type of property popular with other buyers so that it can help to widen your resale market. Pay only what you can comfortably afford, do your own affordability test and find out the market price at the time of purchase.

In conclusion, 2013 is an appropriate year to invest in properties in order to have a hedge against inflation in the coming years.

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