Warren Buffett is quoted as saying that we should be fearful when people are greedy and to be greedy when people are fearful. This quote has been used many times by financial experts and analysts in almost all sectors of investment vehicles. Yet, in reality, not many practice this principle in real estate markets.
Instead, time and again, you’ll find people being greedy when other people are greedy, and being fearful when others are fearful, including the guys who quote Warren Buffett.
With this, I want to examine real estate markets by pitching various markets side by side and by doing a comparison from the global to the regional context. For example, the West versus Asia-Pacific and then, with the various countries or cities to show why I believe that the future upward trend would be in Asia-Pacific and what my thoughts are regarding Malaysia, from within the Asia-Pacific context.
Culture and Social Make Up& The Exploding Middle Class
A report by Ernest and Young released on April 25, 2013 in London states that “By 2030, two-thirds of the global middle class will be residents of the Asia-Pacific region
while Europe’s share of this population will have dropped by 14%.”
Stable, mature, strong anti-speculation measures in
place for a long time
Myanmar, Thailand &
Weak secondaiy market, lower standard of living,
not suitable to those without holding power
Relatively developed, no language issues, close to
all other Asia-Pacific countries, least restrictions on
foreign property ownership, etc
Asia- pacific Property market Long Term Appeal For The Middle Class
GDP CURRRENT RATINGS RESERVES, ACCOUNT
Why Malaysia? Best Country to Invest in 2019: Bloomberg
If you refer to the diagram from above, you will notice that I’ve divided the major countries and cities into four unique clusters.
The first cluster comprise countries and cities like China, Singapore, Hong Kong and even India that were the major tigers or dragons of Asia or Asia-Pacific which saw massive growth for a good 20 to 30 years. In the midst of their economic progress, property prices have skyrocketed and become too expensive for the middle class to purchase. Most of these countries or cities have imposed very strong anti-speculation measures. Thus, investing in these countries would put you in direct conflict with the governments.
The second cluster comprise the more mature countries like Australia, Japan, New Zealand and South Korea which have much more experience in dealing with real estate market stability than most other countries in the Asia-Pacific. These countries normally require investors to hold on to their properties a lot longer as there are much less speculative activities happening there.
In addition, I place countries like Cambodia, Indonesia, Myanmar, Thailand and Vietnam in the third cluster. These markets have seen a lot of price increase in recent times but realistically, most of these increases came from the primary markets; namely from developers’ launches. These markets have seen great rental yield for early birds but this trend is already beginning to dwindle.
One reason for the weak secondary market very much likely deals with the weaker average household income. In fact, you would be hard- pressed to find a sub-sale agent in these places which is an indication of the lack of or weak sub-sale market residing in the third cluster. I must also qualify that there are definitely opportunities in these countries as well but one has to have holding power too.
I have tried to see where Malaysia fits within the three clusters and somehow it doesn’t for several reasons. Firstly, property prices have not skyrocketed to giddy heights nor has the government introduced the same kind of anti-speculation measures as is the case for countries or cities in the first cluster. Neither has it achieved the the level of maturity as the countries in the second cluster. And,it also has a much stronger sub-sale market as compared to those residing in the third cluster.
Yes, the Malaysian real estate market has been lagging behind most other countries in the area of capital appreciation in recent times due to a number of factors of its own making in some ways.
However, even with the last banking crisis in 2008, Malaysia was scarcely affected. This also shows that Malaysia’s real estate market has very little downside. With China’s relation with Malaysia and its strong desire to foster even grater economic ties plus many economic transformation programmes taking shape,the future looks bright.
If you look at the Malaysia Housing Price Index ,you will see that even with the 2008 Lehman Bank and Subprime Crisis ,Malaysia’s property prices were not at all affected which is a clear sign of property prices being at the bottom and having little to no downside.
Well,remember what Warren Buffer said.
As you will notice from the previous diagram, by 2030, 66.67% of the world’s middle class population would reside in Asia- Pacific according to a report released by Ernst and Young in London on April 26, 2013. In the same report, the middle class population in Europe would drop by 14%! I believe that one does not need to do too much to see this happening. As such, it is really a no-brainer as to where you should be looking to invest in the world.
What about the US?
Firstly, I would like to state that there are always good deals everywhere 一 even in the US. Anyone who has been reading my articles would know that I’ve mentioned that timing is the most important element when it comes to investing 一 even more so than location. As such, there could be really good deals to consider when the timing is right.
The Question One Should Ask Would Include:
1.) Is there nothing better to invest in nearer to Malaysia or Singapore? If the answer is no 一 well, so be it.
2.) Are you very familiar with the tax laws or any other laws governing real estate in the US which has become more inward-looking?
3.) Is it going to be more expensive and tedious maintaining a property that is situated 24 hours away from where one stays?
Malaysia Beats Emerging Market Peers as Asia Outshines
Meanwhile, Asia’s economies which have stronger buffets against headwinds like the Federal Reserve policy tightening, outshone the rest, with Malaysia holding on to the No. 1 spot.
Malaysia remained on the top of the list -thanks to its current account surplus, relatively stable economic growth outlook and valuations. Recent data showed that inflation was recorded at 0.6% in October as compared to a year earlier in comparison to its 10-year government bond yield of about 4.17%.