News & Articles How the Falling Ringgit Affects Property
How the Falling Ringgit Affects Property
21 Sep 2015
The falling value of the Ringgit has been on many people’s minds recently. This concern is completely reasonable and as Malaysians with investments in local property, property owners will no doubt share this concern. They will want to know how the devaluing ringgit affects their property value in the long term and short term.
Different experts have given their opinion on this issue, but most of them agree that the Ringgit depreciation is only temporary. However, they differ on how long the slump will last and how bad it will get. According to Bank Negara governor Tan Sri Dato' Sri Dr. Zeti Akhtar Aziz, the foundations of the Malaysian economy is still stable and is not rumbling as many claim.
The Ringgit depreciation actually began at the end of 2013 mainly due to the falling worldwide oil prices that fell about 45% is the past year. This falling oil prices is caused by an influx of supply which has superseded the demand. Malaysia relies heavily on its export of oil and gas as well as its related products and this is why we are strongly affected.
According to experts, the depreciation can go both ways and effect the property market either positively or negatively.
Positive effect
The falling Ringgit means that overseas investors will find local Malaysian property very much more affordable. Hence, they could be more inclined to buy property in Malaysia, driving up the value in certain places.
Negative effect
Some experts believe however, that if the slump goes on for too long, foreign buyers will be discouraged from buying any more property as they believe the shrinking Ringgit may devalue the price of their property. Additionally, locals find that the devalued Ringgit is now worth less and are more careful with property purchases. This may lead to a decrease in property demand, which in turn may cause the value of property to lessen.
Neutral effect
There are also those who believe that the fluctuations of the ringgit will not affect property value as the economic fundamentals of the nation remain intact, meaning that people will still have jobs, the economy will still function and things will go on as per normal, especially for Malaysians spending within the country.
Whichever view you choose to believe, it is prudent to consider that currency fluctuations are very complex in their effects and even the most experienced economist finds it hard to predict what will happen, since economies are made up of people and people’s reactions are dynamic. Furthermore, there are many factors influencing a currency’s effect on property.
Different experts have given their opinion on this issue, but most of them agree that the Ringgit depreciation is only temporary. However, they differ on how long the slump will last and how bad it will get. According to Bank Negara governor Tan Sri Dato' Sri Dr. Zeti Akhtar Aziz, the foundations of the Malaysian economy is still stable and is not rumbling as many claim.
The Ringgit depreciation actually began at the end of 2013 mainly due to the falling worldwide oil prices that fell about 45% is the past year. This falling oil prices is caused by an influx of supply which has superseded the demand. Malaysia relies heavily on its export of oil and gas as well as its related products and this is why we are strongly affected.
According to experts, the depreciation can go both ways and effect the property market either positively or negatively.
Positive effect
The falling Ringgit means that overseas investors will find local Malaysian property very much more affordable. Hence, they could be more inclined to buy property in Malaysia, driving up the value in certain places.
Negative effect
Some experts believe however, that if the slump goes on for too long, foreign buyers will be discouraged from buying any more property as they believe the shrinking Ringgit may devalue the price of their property. Additionally, locals find that the devalued Ringgit is now worth less and are more careful with property purchases. This may lead to a decrease in property demand, which in turn may cause the value of property to lessen.
Neutral effect
There are also those who believe that the fluctuations of the ringgit will not affect property value as the economic fundamentals of the nation remain intact, meaning that people will still have jobs, the economy will still function and things will go on as per normal, especially for Malaysians spending within the country.
Whichever view you choose to believe, it is prudent to consider that currency fluctuations are very complex in their effects and even the most experienced economist finds it hard to predict what will happen, since economies are made up of people and people’s reactions are dynamic. Furthermore, there are many factors influencing a currency’s effect on property.
Source: DurianProperty.com