There are newly completed developments today where the occupancy may not be that high, not even 50 percent. A close friend’s condo in Penang was completed last year. He has moved in and has stayed in the new condo for slightly over a year. Yet, every time I dropped by, the number of cars parked in the car park would tell me the occupancy statistics. Sometimes when we think about it, why are the units empty when it has all been sold? Well, my friend bought it to live while many may have bought it ‘to leave’ it open for any potential sudden capital appreciation. For example, potential of selling it for good profits which became hard because the home prices are today not like yesterday. In brief, incomes need time to catch up. When it does not (rising income), it’s EITHER home prices stay stagnant or home prices suddenly collapse, when the owners could no longer pay their mortgages. Let’s wish for the former shall we?
Second reason why they buy-to-leave is because they may have wanted to move in but have now decided to delay a bit because even the renovation would have cost a bomb. Unless people feel they will be getting a promotion or a huge bonus soon, it’s not wise to spend too much currently. By the way, do not overspend to do the renovation, the great feeling does not last forever. After a while, everything normalises but thats also the time when you realised that you have spent so much for renovations. Here’s an earlier article: Advantages of buying a renovated unit Your future buyer may not share your taste too… Third reason is a forced one. They bought-to-leave because they followed the trend then. Everyone was telling them that everyone was earning good money from the property market. So, now they are still paying for the homes while deciding what to do next. Many would have told them to rent it out but even renting it out would mean spending some money. An empty unit fetches very little, really. I usually rent out fully furnished.
Personally, for owners of these ‘buy-to-leave’ units, it’s much better to spend a bit and rent it out. How about thinking about AirBnB? Earlier article here. Buying to live is seldom wrong. The reason is simple, we need a roof over our heads and we need to rent if we do not have our own place. If we buy a place with three rooms, we could even rent out one or two of the rooms and it helps tremendously versus just renting a room to ‘save cost’ which actually makes little sense on a longer term. Oh yeah, it has not happened in Malaysia but in the UK, if one were to buy a home and leaves it empty for more than 2 years, the owner will be fined! Well, it’s not that successful. Here’s one recent article in the Guardian.com. There’s another one here in thelondoneconomic.com Do we think our government would do the same? I guess it depends on how bad the property prices are, especially if the prices keep rising faster than income. Happy following.
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written on 26 May 2018
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