Sometime back, someone asked me if buying a car is a bad investment. I look at him and say, it depends. You see, for someone just started working, buying even a segment B Japanese car like Vios and City is a bad decision and a bad investment. However, for a senior manager in a multi-national company earning RM20k per month, then buying a Toyota Camry Hybrid is not considered a bad decision and can be considered an investment for his image lah. (How could it be that a senior manager is driving just a Vios… right?)
What about property? Actually it’s the same. Someone (Mr. A) stretching his salary to the limits just to buy a property which he should not buy is making a bad decision and is a bad investment decision too. That same property could be bought by someone (Mr. B) with much higher salary and suddenly, it is the right decision and perhaps a good investment. Difference? Holding Power. Should something happen, Mr. A will go bankrupt. Mr. B could ride it out and when market recovers, could sell his property for a higher price than he bought. A fair comparison is thus NOT about the property or the car but on the wealth or the income of the person who’s buying it. Perhaps we look at someone who just bought the most expensive property in Hong Kong
Article in thestar.com.my here. Raymond Lee, the chairman and co-founder of Lee & Man Paper Manufacturing Ltd., and his wife, Wong Man Yi bought Hong Kong’s most expensive luxury property purchase this year, paying HK$1.45 billion (RM770 million) for a nine-apartment complex in Repulse Bay. This was reported by the South China Morning Post, citing land registry and company records. The seller of the three-story property was American International Assurance Co., the newspaper said. AIA bought the property for HK$20.2 (RM10.69) million in 1985. The article also say that Hong Kong’s property market is making a comeback. Prices have climbed for 10 straight weeks, rebounding from a slide that began last August. Here’s that article in thestar.com.my
Three learnings here. First, someone with lots of wealth could afford to buy something really expensive anytime. It does not matter if the market is bad or good. Secondly, it’s about getting ready for opportunity. That same property may no longer be available in the future because a new buyer could buy and keep it for the next 20 years for example. Last but most importantly, property prices ALWAYS increase. RM10.69 million in 1985 and RM770 million today. Anyone wanted to debate that this is Hong Kong? Well, about the same time my parents bought a RM85,000 semi-detached single storey home in Ipoh. It’s now roughly RM550,000. That is still MANY times more and Ipoh is not even the top 4 property markets in Malaysia. Happy understanding.
Article written and edited by Charles. News article summarised by Dina Batrisyia.
Next suggested article: Starting the property investment journey right