Waiting for that property everybody likes may take a LONG time

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Two friends who are real estate negotiators were chit-chatting a few days ago. I happened to be their team-mate. Mr. C said that he has a customer who likes a certain project within a certain area and has been enquiring for the past few months but even after viewing a few units, the customer did not want to buy because he felt that the price would go down. His reasoning was that the whole market is ‘slow’ and thus he could wait until the owners become desperate and sell cheap. Ms. K replied that she too had those customers. She would try to propose to them other cheaper units or areas but those customers would say that they only prefer a certain area or a certain development. I told them this simple story which will always be true regardless of the market condition.

Good area does not grow in size, anymore. When an area is very new, when there were just a few rows of houses or even just a condo development in the middle of nowhere, it cannot be an attractive area. However, over the years, when the population grows, the number of commercial units would increase and as long as there is a masterplan for the area, it would soon be loved by many. Usually, this is when the area is also pretty mature and the land available to build new developments within the same areas becomes scarce. This is also when the area is now attractive and prices start going up. Now imagine what would happen if we want to buy into this area? We have to wait for any desperate owner who wants to sell their unit fast. When the desperate owner wants to sell their unit fast, three situations may happen.

Would we be the first to know? . If I am an owner and I want to sell my home fast, I would tell my real estate friend or my neighbours or the friendly security supervisor. If the area is really attractive, just 10 percent below market meant that it is sold within days if not hours. The question here is that are we the ONLY one interested in that attractive area? If not, then are we the neighbour of this owner who wants to sell? If still no, then are very close to all the security supervisors in that attractive area? If the answer is no, then we would never be the first to know…….

Would the price have an opportunity to hit 15 percent? I am very serious about this. Two actual cases. Penang Island, hotspot, nearby bridge and with facing Penang’s first bridge. There was a condo unit which was 10 percent cheaper than other units and it was renovated and partially furnished. My good friend, Mr. V told the agent that he will view the next day. Within the same day, in the evening, the unit was sold and the deposit was even paid. Second case. One high-rise fully renovated and furnished unit. 10 percent below market rate. Owner was going back to Hong Kong. Advertisement was posted and my good friend who stays in the same development saw it within 10 minutes of the advertisement posted, called and immediately went to view it right after work. Deposit paid within the same day. By the way, the stamp duty was adjusted higher by close to 15 percent. Even the tax department does not agree with the price she paid….

Would the number of units grow? Scarcity pushes prices up. That’s always true for all goods and even services. Assuming in that attractive area, there are 3,000 units in total.  If there are 5 units up for grab every month, it would be easily absorbed by the residents there FIRST. Unfortunately, unless something crazy happens, there would never be 100 units up for grab suddenly…  As for those owners who are not desperate and just want to sell based on market price, the prices they want would definitely not be anywhere near 10 percent below the market price. This is the reason why for attractive areas, the prices would not drop. A famous property guru said in his Facebook message that buying in hotspots would always pay off handsomely in the future. I agree. Just to add, that’s why for those who just could not afford these areas, think of cheaper areas nearby. The reason is because hotspots would always be hotspots. I told my two real estate negotiator friends to move on. It will take forever to sell to people who loves attractive areas but want super cheap…

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written on 20 Aug 2017

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