RPC

Real estate speculation drives this cycle of boom and bust. Economic growth leads to higher real estate prices as demand for property (from expanding businesses and flush households) grows. This increase in property prices is ultimately driven by land values: a house costs much the same to build, in terms of labour and materials; regardless of where you build it it’s the location that makes the difference to the value.

Where is Malaysia now in the property cycle? Is Malaysia in the final years of the upswing of the property cycle? How long more will the cycle remain robust? Malaysia property prices have been rising since 2010 fueled by easy credit, low interest rates and high demand on the back of strong economic fundamentals. The projected super cycle that will bust in 2012 did not happen. Prices continue to rise.

In the “Business and Real Estate Cycle: The Kuala Lumpur Office Market” by Siti Almafahaza, Stockholm, 2011 master thesis, the author described the development of Real Estate in Kuala Lumpur that has taken place since 1960’s and how it has changed into a modern city with the impact of industrialization of the economy. The study shows that real estate cycle and business cycle do move in recurring wave-like fluctuations that are in a circular motion.

For years it is interesting to note that property cycle comes and go and no one ever question it. It is so predictable and will happen automatically as in the pattern of day follows the night. Wikipedia described it as “A property cycle can be seen as a logical sequence of recurrent events reflected in demographic, economic and emotional factors that affect supply and demand for property subsequently influencing the property market.