Sometime back, I was speaking to a young crowd. It was a JCI event. Most of the people in the room were 10-15 years younger than me. I reminded the crowd with this statement, “Imagine, all of us in this whole room buys a few properties with ZERO down payment. Have you ever wondered what will happen to our property market?” It may be booming since the number of transactions will quickly rise. Soon, it will be exploding as the property bubble bursts due to the speculative activities. Yet, so many continue to think property can give super fast profits.
Losses are more manageable. Imagine we are investing into the stock market. If we have RM10,000 the maximum we could lose may just be RM10,000. If we have RM10,000 and we invest it into the property market, we may be able to lose RM100,000 if not more. In fact these days, with many ATTRACTIVE deals, every property we sign up to buy, we may be getting money back. Here is the problem. We will usually spend all the money and when the property is actually completed and we realised everyone in the whole 1,000 unit development had the same arrangement…
That desperate situation. By then, everyone would want to quickly rent out, so they will offer whatever price the tenant wanted. By then, everyone who could not hold would want to sell quickly. Assuming just 10% of the whole 1,000 unit development meant 100 units are being sold at a huge discount to the perceived market value. That’s the only way they could sell fast. So, the remaining 900 owners, even if they could hold are now holding a property which could not even be sold at the price they bought many years back. This situation will continue for the next 12-18 months while all these 100 units are being transacted in the market. No one out of the 900 owners could sell anywhere near the price they bought.
Who earns the most? To people who think they are getting lots of money from these schemes, they are also assuming the risks from these schemes. The ones who gained the most without the need to assume these risks would be the ones who arranged these deals. Whatever happens, they get to spend their commission yeah. This is why I disagree that home ownership could either be buy for stay or buy to invest. Buy to stay, please. If one needs to invest before actually owning a home, go ahead and invest into something else. it does not need to be a property.
As a property owner and investor, I prefer an orderly property market. A strong and resilient one where the investment actually becomes a hedge against inflation and where majority gets a roof over their head when they retire versus having to pay rental for the next 20 years or more. Hopefully there are more thinking like me as well? Happy understanding my concerns and thoughts.
Next suggested article: Are we earning, saving, investing and preserving?