When to buy and why should we buy.

We should NOT buy when everyone seems to be buying. If we buy during this time, the prices are usually on the higher side We SHOULD buy when everyone is selling. If we buy during this time, the price is usually softer. This is the same for the stock market. Try to buy those usual blue-chips and they are usually overvalued (based on PER) while unknown counters do not usually attract much attention, even if based on their annual results, they are considered undervalued. Haha. Saying is easy, doing is tough. So, assuming the property prices are falling, when do we enter the market? What if the property prices are STILL rising but the rise is now below the 16-year average?

Image source:

Please refer to the image. Yes, it is showing something which has not happened for a very long time. The property prices are finally rising slower than the past 16-year average. So, would it continue to dip? Seriously, I do not know and do not wish to speculate BUT let me point out three facts when it comes to property investment . As of now, when we refer to most advanced property markets, all three points are still true.

Prices are usually up. When we look over a longer period say 10 years or more, the property prices are usually up. Occasionally due to some crisis, it will dip a bit but except for the overpriced ones, the home prices would recover once the crisis is over. In fact, when we look at the property prices, it is usually above the inflation rate and this is the reason why many would say that if we want to hedge against inflation, property investment is one of the best way.

The need for more homes. Based on the world population alone, we know more homes are needed. Based on the Malaysian population and even the demographics, more homes are needed. Based on the fact that there are close to 1 million civil servants without a home, more homes are needed. In fact, based on the ever increasing FDIs as well as the economic growth coupled with continuous urbanization, more homes are needed. This is why the home that you buy today will become more valuable in future. By the way, many Gen-Ys or even the millennials LOVE to move out instead of staying with their parents. True? J

Property is a really good investment. It is important to diversify when we invest. Most of the time, property investment allows us to earn much higher returns than many other types of investments because the home loan is a leverage. The home prices do not increase based on the down-payment that we pay. It increases based on the total home price. This meant that the capital appreciation is based on the overall property price and not how much we put down as down-payment. This is certainly a good investment unless we bought the wrong one. Happy investing!

Written on 15 Jan 2018

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