No business concerns would be willing to reduce prices drastically unless some unforeseen circumstances happen. Prices would be maintained as long as everything remains manageable and even when business starts slowing down. Secondly, not many businesses would want to reduce their profit margins unless competition becomes extremely fierce or the market condition forces them to. In terms of developers here in Malaysia, I have not read news about any of the usual names suffering from losses despite market started slowing down since 2014 and 2016 has shown that it has gotten worse. If you have such news, please let me know.
Reported in a local media, Tan Sri Eddy Chen who is the MKH Group managing director as wells the patron of the Real Estate & Housing Developers’ Association of Malaysia said that well managed property development companies are not likely to drastically drop the prices of their property. This is because most of the local developers develop their projects with profit margins of between 15%-18%, or even 20% if their projects were in choice locations. He said, “The only reason for them to lower their prices would be for the generation of cashflow perhaps to finance land cost commitments or other such priorities.”
Let’s be objective with his assessments of the local developers. Today, many developers have shown that even if they are not reducing the actual selling prices upfront, there are ways that they can make the deals more attractive. Rebates would be one of them, special renovations package may be another and last but not least, enticing you with extremely low downpayment. This is simply due to the current market situation. During good times, these do not happen. Thus, perhaps drastically is not the best word but are they pressured to provide an overall lower price? Yes. Are some developers more desperate than others? Yes. If market dives deeper into the negative territory, would more developers be providing even more ‘discounts,’? Yes.
Truth is, everything we read are predictions. The only thing real would be our actions. If we believe worse has yet to come, have we saved enough ‘bullets’ and set a target in terms of where to buy, what to buy and how much to pay for? Note, this may or may not happen. If we believe 2017 is going to be a recovery year, actually, it’s best to buy now and not buy in 2017…. Alternatively, how about secondary choices instead. Choices are aplenty, today. Decisions are easier when we are clearer. Else, better take the money and put into FD instead? Happy believing yeah.
written on 2 Feb 2016
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