Reported in The Star recently. An interesting property market thought by Siva Shanker, the immediate past president of the Malaysian Institute of Estate Agents (MIEA). He said that due to the oversupply of condos, the rental charged is likely to drop 20 percent to 40 percent. Many buyers are finding it hard to sell their units for a good price and are now being forced to rent them out for much cheaper than usual. Thus, he is very sure that the winners for the next two to three years would be those who are renting. Major reason is because in 2012, 2013 and 2014, many of these properties were bought on speculation and many of these buyers wanted to flip them as soon as they are completed.
Fast forward to today and everyone would know how hard it is to sell, especially for a good price worth flipping for. These properties have started to flood the market from 2015, 2016 and even till 2017. He said many of these flippers took out a 100 percent housing loan and also the Developer Interest Bearing Scheme (DIBS). In other words nearly zero money down. (No matter what happens, I do not agree to any property bought with no money down. Imagine if the whole market does this. Malaysia would be the next US mortgage crisis example)
He also said that many of these buyers would have bought based on the advice of some property guru and more often than not, they are part of investors clubs. These buyers are told that if they buy that RM600,000 unit now, as soon as it’s ready, they can sell it at RM900,000 for a RM300,000 profit. When the keys are handed over and the housing loan starts, the buyer would have to start paying for it. He may resort to selling but there are few buyers today and it’s also much harder to obtain loans. He may have to drop his price but this would still not guarantee that there would be ready buyers. Of course, this is not happening to the entire housing sector but only in some speculative sectors.
He gave examples of some of these properties which include those RM500,000 to RM800,000 condos, the high-end residential condos and shoebox units like SoHo, SoVo and SoFo. All these have been built by the dozens. He however does not think that the current situation is like the 1997-98 financial crisis. He reckons that even if the rental could not cover the mortgage, at least if it covers half, the seller would just top up the other half. His personal prediction is that by Q1 2016, some interest would be back and Q2 2016 would start to see the property market recovery. He predicts there will be a bit of interest coming back in the first quarter of 2016 and that in the second quarter, the market will be just about ready to recover.
Personally? I think if we are willing to rent high, it’s better to try and find some desperate sellers, offer them a price we can afford and see if they are wiling to let go. If we have to view many different units, just do it now and keep offering. Of course, if the offer is below what the seller bought, we are wasting our time. Offer something which gives them some profits and I think in this way, we gain tremendously. The seller has less pressure from their mortgage and we own a property which we bought at a big discount compared to the current launching prices. This gives us a ready place to stay and to ride out the current slowdown. Happy deciding and taking action.
written on 5 Nov 2015
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