Julius Caesar famously said Veni Vidi Vici. “I came, I saw, I conquered.”. Let’s see this with regards to buying a property. I have an ex colleague, a Singaporean who told me that many years ago, he bought a condo in Melaka. Many years as in 8-10 years. He could not remember anymore and no longer wanted to remember about it. He said no matter how great Malaysian property is, he would not want to buy properties in Malaysia anymore. In fact many Singaporeans bought that same property. After completion, it could not be sold because nearly everyone wanted to sell. While he did not say but I think it was possible that the majority of all the buyers were Singaporeans.
From wanting to sell, it became worse. Since they were not staying and could not sell, they stopped paying maintenance fees. They felt that since they could not sell why should they pay maintenance fee? They are not staying there anyway. Today, it is considered total loss. I would like to remind everyone again that buying a property is beyond just going to a launching, see the scale model and place deposit. In other words, I come, I see and I buy. You can only do this during a good market condition. In fact the risk is going to be high. The question is how long can such good market situation sustain itself.
These days you have to also know what you are really buying and the risks involved. If you are buying with the mindset that it will always go higher, then you are aiming for the US Mortgage crisis in the near future. However, if you check the value based on the rental it can fetch and it gives you at least a positive yield no matter how low, then at least your risk is lowered. No such thing as zero risk.
If you are buying a SOHO, be reminded that in future you are selling to single working person and not a family. In other words, can a single person buy from you in the future if the prices continue to increase? A couple would not want a SOHO. A family would not want a SOHO. A single may want a SOHO but if there are larger units nearby at almost the same price, even if your SOHO has the most modern design in the world, what are the chances that he would buy your SOHO instead of the larger units slightly further away?
Irregardless of what you intend to buy, manage your risk. A lot of it is just plain logic. If the whole block or even majority of the block is bought by foreigners, are you sure these foreigners will be staying there? Would the situation that my ex-colleague faced repeat itself? If you can barely afford the unit today and you know you are earning more than many of your friends, are you sure you can sell it even higher later? The best is always to read more, learn more before you buy but even if you know more, use your logic to think logically. Buying a property is not just I come, I see, I buy. Manage your risk please.
written on 10 march 2014.
Next suggested article: 30 million population, urbanisation, property price and long term view
