Why 10 percent is a significant number for me.

How much should the price go up before we should think about selling our property? The higher the better of course. What about the percentage drop before we buy that home we have been aiming for? To those who say wait till it hits bottom, I say good luck. To those who answered 20%, do look at Singapore’s example of cooling measures. It has not even reduced the prices to anywhere near that and we are talking about just the luxury ones. The HDB ones hardly moved in terms of prices. In Malaysia, despite property transactions going down and market being so negative, the prices have not really moved to. Selectively perhaps but not in that few hotspots that many are waiting for. For the remaining who think like me and believe 10 percent is already significant, well read on.
If the property price of the place I am eyeing drops 10 percent, I would somehow find a way to buy one unit. The reason is very simple. Despite Singapore having a much tougher cooling measure regime than Malaysia, the property prices have only fallen less than 10 percent thus far, from its peak. Sigh. Read here: Lifting cooling measures? Too soon: MAS This does not mean that property prices would not drop more than 10 percent. It only tells us that I have no idea what’s the bottom but 10 percent represents a significant value and potential capital appreciation to me. Besides, this 10 percent may already meant a positive rental yield from the current low or negative yields.
If the property price for a secondary property I bought has gone up more than 10 percent per year for just half of the Real Property Gains Tax number of years, I would sell and reinvest in other undervalued but easy to rent out units. In the process, I would also give my family a nice little holiday in some overseas country we have never been before. 10 percent up is a huge gain actually and not just 10 percent gain. What about if the price went up just 10% after 5 years? Example:
Current price: RM300k
Assuming 10% downpayment + fees and taxes is RM40k
Overall price after 5 years? 10 percent up. In amount, it is RM30k
Gross return: 75% based on total capital invested.
Total returns per year?  75 percent divided by 5 = 15 percent per year.
I think the gain is pretty decent and we have not added the rental which would have also contributed to the principal portion for the past 5 years. I am very sure, some would say that we would incur additional fees and taxes when we sell. Very true. Perhaps it’s better to put the RM40,000 into FD instead and take the 4% return per year which by the end of 5 years would give us RM8,667. Sigh……
In conclusion, any adjustment in excess of 10 percent, whether up or down is considered significant to me. I would personally take appropriate actions when that happens. To the authorities, I think it’s safe to readjust the cooling measures when the market has adjusted either 10 percent up or down. A responsible regulator should not wait till the property prices have gone up or come down too much before taking any actions. In the mean time, help the first timers buy their first home. Forcing the developers may not be the best option. Take the challenge up, build quality and sell affordably. Set in some measures to ensure price stability for these units at least for a few years. Happy taking actions.
written on 13 Oct 2015
Next suggested article: The importance of size vs affordability


  1. “Gross return: 75% based on total capital invested.” you mean based solely on 10% deposit; what about the cost of 90% of the purchase price? Sorry, am I missing something?

    1. Hi Cindy, return on investment is based on how much you invested. Unless you hav bought the whole property via cash. Cheers.

  2. butcher avatar

    am i missing something?? if u add in 2000 per month that u pay for mortgage, it would be 12X5X2000= 120,000
    120,000+40,000= 160,000
    u totally paid 160,000 including a lot of interest. the price only rise by 30k after 5 years. aren’t u lost money already? as the first five years u are paying more interest than capital

    1. Thanks Butcher. If we left the unit empty for 5 years, your calculation is quite valid. However a 300k unit would not require a 2,000 mortgage payment per month unless we shortened the repayment period. If we rented out the unit, the tenant would be paying for the mortgage. If we stayed, then we would have saved the rental. Calculation should also be what we can actually gain if we have just Rm40,000 today and invested it.

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