Expert Series Q&A – Penang Property Secondary Market – Mr. Stephen Soon

Today, in our Expert Series Q & A, we have Mr. Stephen Soon. He is the Chairman of Penang’s Auctioneers Association as well as the Managing Director for MNP Auctioneers. He has always been seen as someone dynamic and has a very formidable team working with him in the real estate industry. Let’s learn from him about his expert opinion about the Penang property secondary market for 2014.
1. How do you foresee first half 2014 vs second half 2014 for Penang secondary property market?
First half of the year will be an adjustment period as people are still digesting the impact of the recent budget 2014 announcement, and the new Penang State Housing policy that will take effect on the extended commencement date on the 1st March 2014, therefore transaction is likely to slow down. Even potential bidders are stopping to bid at the Bank foreclosure’s Low-Medium Cost Auction properties! I am sure many experts have already shared the same opinion but my point of view is that Penang people are getting more cautious in spending as the sky is currently cloudy in term of the new policy implementation by the State Government. Thus, people are still observing how it goes. You cannot probably make quick profit from property sale with these new policies, therefore people will start to plan if they have a sustainable cash flow or income to hold a property for a longer period and resell with a more sizeable return on investment (ROI).
Second half of the year will start to see improvement in transactions number as both sellers and buyers would have adjusted their minds after experiencing a change in both market sentiments and movements. However it will not exceed past years’ as property transactions have been gradually declining since March 2013. Good news is, I would say that property prices should become more realistic and touchable compared to last year.
2. If you can only afford RM600k loan, would you buy landed in mainland or high rise in island? In term of potential ROI betwen 3-5 years.
I would say that to ensure good ROI, I should not get high loan financing. Assuming I place 30% down payment to purchase a property, then its selling price will be around RM850,000 (after all maximum loan is only 70% for third property financing, under BNM ruling). With this price I would invest in a spacious condominium in Penang island. Alternatively, I may invest two landed properties in mainland, both choices will surely make good ROI to sell after 3 years.
If I can only afford to pay 10% down payment of a RM670k property and I am eligible to obtain 90% loan financing, I will go for high rise in Penang Island as the demand for below RM1mil property at a good location is generally high and affordable among the Penang people and with the rising of inflationary effect, selling a good condominium in the range of RM900k to RM1mil will be considered normal after 3 years.
3. The difference in price between the new and secondary market is wide, some up to 50%. If this is the case do you think the new property prices are under pressure to go down?
New property prices will not and also cannot afford to go down in prices. One is due to the building and construction cost. Property development requires huge investment and thus needs high returns. Without this, developers would rather not build if the selling price is on a downtrend. Development project will only be competing with other under-construction property and not the secondary market. Furthermore, the winning factors of the development projects are also depending on concept, developer reputation, location and not primarily on price. This is main reason why a secondary property cannot be used to compare to the primary market.
4. Do you agree that it is best to buy now?
Anytime is the best time to buy if one have sufficient cash flow on hand and found the right property. The rationale of my point is that if people are not too heavily dependent on loan financing to purchase a property, and not rushing to buy one, you should be able to find the right property. Although in my point of view these few months will be the adjustment period, I have already seen property developers in the recent Penang MAPEX giving surprises by offering value-buy units to the potential buyers and people are still surrounding their booths after 10pm!
Thank you Stephen!
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