So many empty units, why prices stayed the same?

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Whenever we drive past some newer condo projects these days, many times the number of occupied units might just be 20 percent or 30 percent. True? I think this is true not just within the Klang Valley but also Penang island. It includes one of my old friend as well who bought a condo unit in Penang but is not rushing to move. Reason is because he has yet to get the offer that he can accept for the place he was staying currently. He had hopes to sell his secondary apartment with a higher price but transactions are fewer and buyers are much more cautious these days. This would be just one of the reasons.

As for the other empty units, surely the buyers bought because they wanted to sell and get profits, right? Cash in as soon as key is handed over, right? Since the units are RM500,000 or more today, how long can they hold? Actually, they can hold for quite a long time, as long as they do not lose their job. Remember how tough it was to borrow money for home loans from banks? It was very stringent. Thus, those who were able to borrow would have been those who have shown that their salary could support that unit they were buying, whether or not they own other units. Due to this, many may choose to stay put and wait for better times.

Would they let go? Based on the prices they paid a few years ago versus the current price, I think majority of everyone would not have any losses when they sell. Maybe less profits than what they expected but certainly not losses. Yes, another major reason is also because of the Real Property Gains Tax. Many felt that the tax they would be paying is too steep. RM100,000 profits would mean up to RM30,000 tax! Read here: Scared of RPGT but willing to wait and risk?

However, if they sell today, what would they be investing in? Another new property which is priced around the same as their current property and wait for a few more years for completion? Actually, they are a little worried that the same situation may happen again, or worse. After all, they bought during boom times and currently, everyone is forwarding negative news. Buy today may mean by the time they can sell, Malaysia is already in a crisis?

This is the major reason why transactions are falling. Sellers do not have another investment that they want to pursue yet. It’s not that clear. Buyers meanwhile are cautious. Who dares to buy when everyone they know is saying that a financial crisis is about to happen. There are just too many what ifs. Selling and enter the stock market of today? The ‘everyday falling’ share market? Haha. Yes, I think the transaction numbers would continue to fall until and unless the negative sentiments start to change for the better. My advice? Sell if there’s a good enough profit. Enjoy some of the profits with your loved ones and use the remaining for a secondary property which can be rented out easily. Think longer term and everything should be just fine, at least that’s what I wish and hope. Happy waiting for better times.

written on 9 July 2015

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