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Property Investor Clubs – the speculators?

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Let me summarise an article I read in The Sun about how property investor clubs are the actual reason why speculations happen. According to National House Buyers Association secretary-general Chang Kim Loong, these property clubs are buying en-bloc from developers and they are usually led by a leader who is a property guru. Due to the fact that they are able to buy in huge numbers, they are able to get huge discounts from developers. Some even get 25% discounts on purchase prices. Once these units are  sold at such a hefty discount, the ‘losses’ are then passed to the average buyer in subsequent phases of the project to compensate for the much lower profits or perhaps none during the first phase. In fact according to Chang, there are at least seven such clubs in Klang Valley and this may be growing.

I am not a member of any investor club. However, I have advised a few of my friends who said they wanted to invest immediately to join these clubs. Truth is, I would have preferred these friends to read more about property investment, view more units, visit some property fairs before they actually buy any property. However, if they just want to follow the crowd, instead of following just anyone, it may be best to follow these investor clubs. The reason is because typically these investor clubs are pioneered by someone who has had some experience in property investment or even someone well connected in the property scene. Thus, you may have access to properties to buy almost immediately. Some have commented that they have special discounts on certain projects in KL while some told me that they do not learn much about the property market but more on the properties that the investor club leader have access to.

I believe if these clubs are really buying up a substantial amount of units in any development, say 30-50%, the effect is huge and perhaps we can term them as speculators but truth is, this is no big different from a group of 50 people who does not know each other and all of them have just one thing in their mind. Buy and flip. The only difference is perhaps these investor club members might have already gained tremendously if what Chang said about the discount is really true. I seriously hope that developers should really think if they wish to sell such a huge quantity to these investor clubs. Perhaps some units but 50% like what Chang mentioned? If I get any first hand information about this, I do not think I will tell my friends to join the mentioned property investor club. It’s bad for the market.

written on 25 Jan 2014

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