A friend recently complained that the owner of the condo he wanted to buy refused to budge from his sale offer price. I said, it’s okay, move on to the next one. Surely there are other units within the same development for sale? He replied that there are very few other units and in fact he has viewed them all. He then questioned, ‘I thought the property market is in a bad shape now, right?’ I asked him what he meant by ‘market bad.’ He said no one is buying and there’s way too much oversupply of condos. Following would be my short answer to his statements.
No one is buying. I do agree that property transactions are down from previous years. Property transactions and price, both dropping. (Jan – Sept 2016) However, the total transactions should still be around 200,000 units which is hardly considered a small number. In other words, many are still buying and those who are buying currently would be people who are able to get their loans approved. In other words, market is not being pushed up due to speculative buying like a few years ago when the total transactions per quarter could even reach over 70,000 units! (Year 2011). At that time, with DIBS, the bravest would go in and buys a few units at one go. Today, brave or no brave, the bank may not lend to you. Plus, how many could come up with 10 percent for first two and then 30 percent for the 3rd property? 30 percent of RM500,000 is an advance of RM150,000!
Latest mortgage approval is on the lowest level Difficulties in getting a loan will continue… 2019 This meant that there are fewer people successfully buying a unit they want. However, with the current economic situation, banks are also taking a more prudent stance and thus loans would only be given if they believe we can pay. By the way, the banks do not gain much by pushing to declare someone a bankrupt. That’s just the only way to ‘punish’ the buyer who could not or refused to pay up. Total bankruptcies are rising. 82,383 bankrupt Malaysians from 2013 – 2016
Oversupply of condos. Here’s an earlier report. KL’s luxury condominium market? An update Plus these days, the overhang of newly launches properties are also quite high, for the not affordable ones. one latest article here: Unsold primary residential properties? RM8.27 billion worth … (HUGE) However, these are not an advantage to my friend who was buying that particular condo. He was buying from the secondary market and the development that he was buying is considered fully occupied.
When the development is fully occupied, the supply of available units for sale within the whole development decreases. Due to this, the sellers have much more bargaining power. That was the reason why my friend could not get the unit that he wanted and he could not use the logic of, ‘there are many other units that I can buy.’ Anyway, I told my friend that there are definitely other developments if he is not willing the price that he was offered. He can definitely negotiate better when the development is only partially occupied and there are still many motivated sellers.
written on 11 Mar 2017
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