December 23, 2015
Is the property market extremely negative currently? Transactions falling and even pricing? I noticed one thing recently. Many people say but they do not really mean what they say. Seriously, I think something must be wrong somewhere. You see, nearly every one I know is negative with regards to the Malaysian economy. It’s as if we are about togo bankrupt. However, instead of making preparations to save for potential rainy days, many changed their expensive smartphones from last year or the year before which are still working to that few most expensive smartphones this year. Two spent huge amounts on renovations and said that it’s a home they would be staying for a long time, so they have no choice but to spend. Well… during a crisis, renovation is going to be the LAST item on my list.
A few negative ones told me that they are looking for a property to buy. Some already bought. I hope they understand that property is the hardest to sell or cash out. In fact buying today in view of a collapsing economy in the near future is also one of the worst decisions. Perhaps they just intend to hold until the crisis is over. Well, if they are expecting a crisis to come and they can hold, why not buy during a crisis instead? That would be buying from distressed buyers and most of the time get an undervalued deals. During a crisis, there would be lots of sellers but very few buyers. The amazing thing is, even some real estate negotiators are negative themselves. I am not sure how they can sell any property at all in this case. Has everyone forgotten that attractive opportunities emerge during downturns?
One thing is for sure however. When the crisis comes, everything will be cheaper than they are today. Many restaurants would be fighting for survival and suddenly are willing to take a lower profit margin instead. Malls would be having sales virtually everyday. Developers may be forced to look at breakeven instead of current profit margins. The only tiny issue is this, during a crisis, many people would lose their jobs, thus this may increase the non-performing loan (NPL) for banks. This in turn would drive the banks to reduce their lending to ONLY those who can really qualify. This would shrink the demand for properties even further.
There is little need to be over-confident and try to say the market is awesome when it is not. Everyone knows. However, it is not a clever thing to keep saying negative, spreading negative and yet hoping what we buy today will give us great profits tomorrow. When the whole market is too negative, no one gains, not even buyers who bought yesterday, today or tomorrow. Oh yeah, 2016 is going to be flat, as per many experts. Read here: Flat 2016? Good 2018, 2019 and great 2020? Happy understanding and not simply spreading.
written on 24 Dec 2015
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