Factors that affect value of a property in Malaysia

By Srishanbid.com

When we speak of transaction of goods for a sum of money, it is rarely the case of the price being solely dependent on the cost. The price is most of the time determined by the value of the goods. In terms of property, this value is created by basic theory of the supply versus demand. Many factors impact the supply versus demand of property in Malaysia.

For starters, location. It is common knowledge that property prices between mainland Penang and the island can be as much as RM 400K. This disparity is also extended between states. States with lower income per capita like Kelantan will have lower property prices compared to say, Selangor. The more supply of cash flow in a location, the more demand on the property price. Prices of land also effects the property price. Where land is scarce like in the case of Penang Island, the land price rises significantly compared to the ample land in mainland where development is rather flat instead of high rise.

A recent development in Feng Shui and Vasthu Sastra has made certain properties more in demand than others. A property properly placed near a body of water would fetch a handsome price compared to same one placed at a cross junction. In search for prosperity and steady growth, people will relentlessly look into various factors including the position and placements of offices and homes. This in turn makes a well placed or well designed property more eye-catching and favourable.

Speaking of growth, Malaysia has seen a steady GDP in recent years. This stability has seen an increase in House Price Index at 9.9% in 2011; the highest recorded in the last 10 years. A steady GDP gives a positive impact on the people’s purchasing power. With this in hand, the dream of owning a property is materialized; giving rise to the demand on property and thus eventually increasing the property price.

The government’s introduction and revision of its property related policies have increased the interest in the property market. The waiver and exemption revision of RPGT had introduced small players into property investments. Incentives introduced for foreign house buyers, brought in external cash flows to further increase the property prices. The government had also restructured the policy of build and sell, which has increased confidence of purchasers and made developers more conservative impacting higher value of property. Banks have jumped in by making home ownership easy. Lower mortgage interest, 100% financing and lower base lending rates has created an influx of property owners.

Another way value of property is impacted is through auction. Many auction houses are now operating on-line and, real estate bidding has picked pace in Malaysia. The mode of open bidding has encouraged many investors and home owners into the real estate bidding arena. As surplus, these on-line auction houses have provided a comfortable and convenient way to market properties. This easy access has drawn in many conservative investors and has by and large contributed to the increase of interest in property investment thus upping the value of properties.

Property agents are indispensable when a property requires selling; especially if it is a difficult one. Property agents are equipped with high levels negotiating skill and coupled with market research and innate knowledge, can maintain or even fetch an exceptionally good price for a property. As more and more properties nowadays are being transacted via agents, the property prices have seen a boom as it is easier for property owners to sell at higher prices.

Inflation has also played a key role in increasing the value of properties. Inflation has given rise to construction costs where prices of materials and labour has gone up. Apart from that, operation costs in this industry has also increased in pursuit and drive to use better technologies and provide better welfare. Property prices are then embark on an increasing trend to keep the construction industry live and running.

All in all, the price of a property depends much on the cost as well as the value created by external factors. External factors such as government policies and auctions made easy, when working positively will contribute to increase of property values. However in cases such as global economic downturn, the same factors will work negatively bringing a surplus of property in the market compared to demand thus lowering the property value.

Visit www.srishanbid.com for more information on real estate open bidding in Penang and Malaysia.

1 comment

July 25, 2012 at 10:39 AMcondomana

How come speculation is never mentioned in the article? Pay RM10,000 now and pay nothing until OC? ...:)...Anyway, buyers are more sensible and less emotional now. Regulators/gov must do their part to keep excessive speculation in check, keep local citizen in mind when it comes to town planning, charge foreigners a levy when they buy local properties, use that money for our local community, then everything should be just fine.