People talked about property bubble burst in Penang Island 2 years ago. Some said it had already the peak and today the history repeats itself. People is still saying the same thing, the property in Penang Island is already peak and going to burst soon. So, how true is this?
You get all kind of answers depending on who you ask. :D Generally, these are the answers that you can get:
Yes, It Will Burst Soon
- It is about supply and demand. The supply has already more than demand. You can do your own research especially at night especially for those luxury houses that has already obtained the OC. Try to count how many of the houses have their lights on. You will only see < 30% occupied on majority of the ready house development. Thus, it is going to burst soon.
- I just don’t afford to buy and I hope it will burst soon. So, I am waiting for that moment and tell everyone that the property is going to burst soon.
No, It Will Not Burst
- The property is in good shape. Generally property in Malaysia or even in Penang Island is still a lot more cheaper than our neighbor countries. Thus, it will not burst anytime soon because we have a lot of foreign investors.
- Penang property was undervalued in 5 years ago and it was not appreciating as it supposed to be. Therefore, the recent past few years rapid appreciation was just catch up with the past. So, it will not burst.
What Should I Do Now?
I know you desperate to know the answer but from my comments above, you can kind of can guess that I”m more bias towards to say there will not burst in Penang property market. In my opinion, when the supply more than demand, it will not burst but it will only be stable down for probably 2 - 3 years. This is because most investors including speculators are rich (I believe) and they will not easily to let go to sell at lower price. After the property market correction, it will then catch up again.
However from a personal finance perspective, you should always plan for the worst. You should always assume the property bubble is going to burst. Let’s say if you’re buying a $1M house, you should expecting of losing of 35% (based on the US sub-prime crisis data – refer here: worldwide house price trend till 2010). So, if you afford to lose $350K, then you can go for it.
P/S: If you interested on looking at the average transaction property market in other states of Malaysia, you can refer to here.