Buying property? How much is too high, really?

In a famous property guru’s Facebook, he asked the question of whether should he accept a deal from a developer who was asking him to help them sell their RM1,200psf condo which was within just few km from KLCC. The responses were mostly negative. RM1,200psf is looked upon as very high today with current sentiment. The sentiment today is nowhere near the bullishness of 2009 to 2012. In fact, another friend who has accumulated over 10 properties told me in our latte session that he is keeping cash and hopefully his prediction of more auctions would come true. Especially the higher end ones because the prices have gone up way too much and with the newer launches all going for lower prices and current negative sentiment, some are bound to have to sell.
Just few months ago, another friend said that she was offered a good deal for a new condo. RM700psf only in a very popular and matured area. She said the reason given was because the developer was not famous, thus it was not easy to sell but the whole area was already above RM700psf. I asked her, would she be willing to stay there? She said of course not. She prefers landed. Then, I asked her if she is single would she rent that condo. She said, it would be tough as the rental has to be at least RM2,500. How about renting to a couple then? She said, RM2,500 is still high even for a couple as the couple can buy a condo and pay lower mortgage instead. She laughed and understood. If she does not want, why would she buy and hope other people would want? Of course, she can also buy and wait for completion and upon completion, for the prices to appreciate 20% like the years before. Then, again, if you survey around, the newer condos are already sparsely occupied today. Should we take such risks?
Personally, I think it’s considered a high-risk if you were to buy properties which could not get rental yields to at least cover your mortgage. Of course, the market may suddenly rebound and your decision to buy today may be the best ever 3 years down the road. However, do attempt this only if you are really very cash rich. Do not do this with your first investment property. Seriously, the only reason why your friends who bought such properties tell you how successful they were was because of circumstances then. PLUS, those who are still holding their high-end condo and could not rent out today did NOT tell you about their sad story. There are still lots of opportunities, even if the return may not be as lucrative as your high-end property. Happy deciding.
written on 18 Mar 2015
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