Property Prices yet to fall

From the Business Times:

THE latest cut in interest rates by banks will encourage more homeowners to refinance their loans, a trend that should become visible in the market in the next three to six months.

Rahim & Co executive chairman Datuk Abdul Rahim Rahman expects the property market in the country to feel the full impact of the global financial crisis in the coming months and to recover in two years.

"Before it starts recovering, we have to face the worst. The property market is usually slower to recover than the economy," he told reporters in Kuala Lumpur yesterday.

Property prices have dropped by between 10 per cent and 15 per cent since late last year as prospective buyers adopt a wait-and-see attitude in committing towards purchases and banks become more cautious in extending loans.

"The situation today is definitely not as bad as during the 1997 Asian financial crisis when it took at least five years for the property market to recover," Abdul Rahim said.

He attributed this to the country's more sound economic situation and the RM7 billion economic stimulus package.

Property prices have only not come down so much because the retrenchments have been relatively mild so far. But its only a matter of time. Industrial companies lag as they are further away from the epicenter of the financial crisis.

From the Sun on February 19, 2008:

To be fair, there have been no reported closures of factories this year. Toy manufacturer Nikko had shut down in the middle of last year. There is speculation about the fate of Dell’s two plants after the American computer giant announced it wanted to sell its factories worldwide. Intel recently announced it would close two of its plants in the state by the year-end but was quick to stress that the 1,000-odd workers there would be redeployed to plants in Kulim, Kedah, and Penang.

The state government has insisted that the number of workers who have lost their jobs is not as bad as what had happened in the financial crisis of 1998. But the authorities are bracing for a worst-case scenario. One major local factory in Bayan Lepas, a subcontractor for electronics multinationals, has sent back about 600 of its foreign workers.

Massive lay-offs have not happened yet. But once they happen, expect property prices to come down hard. Half price condos. It's not unforeseeable.