Impact Of Inflation On Kuala Lumpur Real Estates

Oil Has Indeed Falls Below US$135 Today. I expect oil and commodities prices to fall continuously. As mentioned yesterday, oil may stage a rebound To US$160/barrel after falling to US$118/barrel. This is the economic cycle where bond & stocks will also be drag down due to inflation worries.

Inflation will prevail, causing economic downturn. Jobs loss will increase. Due to high margin of financing given by banks during the last fews years and considering property value has not appreciate much, bankers will panic to execute forecloser for residential properties for location out of the 20km radius from KL, especially for those pricing below RM300k.

As spare production capacity is high and income of the average or poor are greatly reduced, both office space, industrial and retailing outlet will also be affected not with standing where these are located .

As most of the residential properties sold during the last 4 years are mainly for own-use, prices for residential within the 20km city radius will hold or soften slightly, with some forecloser by banks giving great bargains. It will be a scenario where property price won't drop much in this location, but with occassional good bargains from banks' auctions. However, properties below RM300k will be slow to dispose (if no good bargains is offered), especially financing from bank will be tightened with buyer having to cough high initial deposit. As for high-end properties within this location, selling will be easier with lots of good bargains as buyer in this category remains afordable.

Developers will face challenging times. They really need innovative building designs plus value-for-money package to capture buyers' hearts. And this policy is good only with branded developers, as fear of non-delivery by less known developer will rings in the minds of buyer.

If the economic down turn is a long one, it may change permanently the lifestlye of the mass population. This means also change in the way we live and work. This dictates changes in housing design, community concept, etc that may result in the house currently we stay being out of date and hence drop in demand and value by the time recession is over.

So What Now? Hold Or Sell Or Buy?