Surplus cash? Buying land today should be easier.

Many property guru are saying that 2016 is the best time to buy. Some are predicting 2018 to be a good time and 2020 to be the best time. Well, if a buyer has huge cash surplus in his bank account today, it represents an opportunity. This applies to developers as well. During good times, buying lands for developments is so tough. Sellers often quote crazy prices which are often, ‘take tor leave it.’ There has been many failed transactions last year. Reported in TheStar, the third largest property developer by sales, Mah Sing said that it is ready to buy more land as it predicts a rebound in Malaysia’s property sales in the second half of the year.
Its group managing director Tan Sri Leong Hoy Kum said that Mah Sing has a record RM1.4bil (US$338mil) cash pile. He said his weekends were spent shopping for land and the size ranges from 500 acres to 1,000 acres. He said, “We have reached the bottom of a downturn, and it will recover in the medium term.” Main reason is because 1MDB or even Ringgit has already been taken into account and he does not see any new bad news. It’s time that everyone start focusing on economic growth again. Mah Sing’s target for 2016 is RM2.3 billion and it is on track to achieve it through selling more of the  “medium range to high-end properties.” Biggest potential would be Kuala Lumpur.
If we follow the developer news, we would also note that some developers have resorted to selling their lands instead. There are also good rationale behind this decision. It’s not the best time to launch new high end developments and banks are also extremely careful in lending to home buyers. Holding on to the landbank may not be the best option for many developers. Of course the buyers of these landbanks may be able to command a premium and thus may be better placed to launch the project instead. I think we know some of them too. Aggressive land buying may show confidence of the developers or even the potential recovery as per what Mah Sing has predicted. Either way, decide what we intend to do, fast.
written on 17 Mar 2016
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