Do you have many friends who are telling you that they could flip properties currently? I think flipping stocks in BURSA perhaps but flipping in the property market is not likely. Unless of course we are more active in the auction market and managed to buy a grossly undervalued property. Prices of today is sometimes below the prices we bought just a few years ago. Prices of today is below the prices that we could have sold a few years ago. Two main reasons I guess, banks are only lending to you based on their own valuation and not what you demand. Second reason would be the negative sentiment and people are more inclined to wait for a while more. Statistically however, this is not the same situation in the U.S. It seems that flipping is happening AGAIN. Well, up to 1 over 4 properties in some cities there.
Take a look at the article by investopedia here. Image by ATTOM on the side. As per the article, flipping is defined by ATTOM Data Solutions as a a property that is “sold in an arms-length sale for the second time within a 12-month period.” You can follow them too: Investopedia on Facebook Flipping is thus happening but the return on investment is lower. (In brief, the sellers could still sell for a higher price than they bought just less than 12 months ago even if their profits are getting lower) In some states, the flipping are at a ratio of 1 to 4. (This means every 4 properties bought, 1 was sold within 12 months for some returns in their investment. I do wonder if my friends in the U.S. are doing this.) The conclusion as per the article is that the trends look eerily similar to 2005-2008. (From the whole article however, it is not painting a bleak outlook, merely saying that flipping continues to happen and the risks are rising) Do read the article for a lot more information here. Are we on the brink of housing bubble 2.0?
It’s unfortunate that we do not have many of these statistics. However, if we do look at the transaction numbers versus the value of these transactions, it is safe to say that property prices are still usually trending upwards. This is despite the fact that transactions are actually falling. It may be due to the composition of these transactions which are higher priced versus the lower cost units. Besides that, as all of us know, newer launches are usually priced higher than their earlier launches. One developer friend told me that they have to launch higher or else the earlier buyers would be furious. Quite true lah. Every auctions that I go to, I could see similar faces occasionally which meant that they are trying to buy as low as possible and then sell higher. Alternatively, buy a bad condition property and make it good enough. There are still many buyers who would prefer to buy and immediately could stay instead of worrying about renovations etc. Happy following.
written on22 Sept 2017
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