Burnt today, will still try tomorrow due to greed

During the property boom years in KL, many learnt how to ‘beat the system’ to gain an unfair advantage. They do not actually have the money to buy more than a few properties but they were able to buy a few properties all at once. Some ‘gurus’ taught all these speculators cum short term flippers how to ‘beat the system. Just apply for loans from several banks all at once, at the same time. Due to it being done at the same time, the banks may still see him as creditworthy as the checks were all done at once. It looks simple and promises fast gains. That was one reason why transaction numbers rose extremely fast suddenly within a few years and prices too.

What happens after the loans were approved? This buyer would then have a small window of a few months to quickly sell the properties at a higher price than what he bought. It works like a clockwork in a rising market. Many were also doing it. It depends only on how quickly you started versus those who started later. What if the buyer could NOT sell it fast enough? If the buyer was unlucky and could not sell it before the loan commences, he would have to start servicing the loan. If he could not even rent it out, he would have to bear the full payment by himself. This situation is currently plaguing many of these ‘clever’ buyers and they have been presented with an even worse news; the slowdown is expected to last throughout the whole of 2016. Read here: Property market: Nothing much in 2016 as per Maybank Research

According to the chief executive officer of the Agency of PPC International Sdn Bhd Siva Shanker in an article in The Star recently, these ‘speculated’ properties could be as high as 5 to 10 percent of the market and these flippers may have to sell even lower than the price they bought previously because they could not afford so many properties in the first place anyway.

What do I think about these flippers? Whether they get burnt or not, looking at the more developed markets would tell us that during good times, they will be back. This is why Bank Negara Malaysia should stay vigilant and take appropriate actions as soon as any irregularities in property prices are detected. While property prices would be hard pressed to fall but for it to increase suddenly is also not recommended. Bubble may build and burst in the near future. Read here: Spotting signs of a property bubble, 3 points (updated)  Seriously, property is an investment. For an investment, there is no such thing as a fast and huge profit. Sorry, but it does not work this way. Happy investing.

written on 27 Dec 2015

Next suggested article: Speculators, Interest Rates and Over-leveraging

Advertisements

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s