No, houses cannot suddenly lose a LOT of their value

We all know the plans by our government to build 1 million affordable homes within 2 terms. Here’s an earlier article: Manifesto on affordable homes for Malaysians. Let’s Do It When this was announced, there were views for and against it. Earlier article here: Malaysia’s affordable home mission by the government. Views.  With the current volatile share market, some have painted a bleak picture for the property market. A friend even claimed that very soon those over RM1 million home would become affordable enough for him. Me: “How much should it drop to be affordable?” My good friend: “My property industry friend say 30 percent drop is possible. Everyone is so desperate to sell.” I pointed out to him that if someone is selling his property at 30 percent discount today and it’s within a hotspot neighbourhood, the best person to buy may be the neighbour and not any one of us. IF the whole neighbourhood is selling, then it’s best to find out why instead of buying… savvy?

Second point, it’s NOT going to be IMMEDIATELY 30 percent because it will start with 10 percent and if it’s really within a hotspot then at maximum perhaps 15-20 percent and surely someone would have bought it. When we look at the data from, we may occasionally find some out of the ordinary transacted prices but on an overall basis, this does not happen all the time. Just look at auction of properties from the banks for some clues. As soon as one particularly attractive property is seen to be 15-20 percent below market price, the number of bidders would usually be more than one. The reason is simple. Imagine buying a RM450,000 property which is 15 percent below market price means that the buyer have RM80,000 to tinker around. As soon as he has touched it up, he could put it back into the market for 5-10 percent below market in a few months time. That’s why some property investors focus only in auction properties.

Third point, it’s NOT going to be HEALTHY for the overall market if prices really drop 30 percent yeah. This is because if the owner has a choice, he will not sell it lower than market and definitely not 30 percent below the market. Something negative must have happened. He may have lost his job for example and IF everyone is trying to sell, think what is really happening to the economy! It’s great to find a property which is below market price, go and view and if it’s all good, then buy. By the way, even the bank would not like it. Imagine them having lent to 10 other buyers at RM500,000 and suddenly one desperate buyer tries to sell at RM450,000 or lower? The bank have just ‘technically’ lost RM50,000 per home or RM500,000 of the combined house values of their loans… Anyway, I would still wish anyone the best in finding some properties way below its market value. Happy finding one.

written on 10 June 2018

next suggested article: When everything we want to buy seems so easy; monthly

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