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Why property prices are not falling yet?

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Actual conversation, maybe not actual words but the gist is there. Why property prices are not falling yet? Happened on 6th October with a good friend in a nice cafe in Mont Kiara.

property prices are not falling
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Good friend: I am still waiting for the property price to drop before I buy.

Charles: It will not be easy for prices to drop yeah. What would be the price you are waiting for?

Good friend: I am not sure but I heard from my friends that the prices will be falling very soon since moratorium is now over.

Charles: Not sure about your friend’s comment but did you know that 98% of people who applied for moratorium extension got extension? It means that if these 98% of the applicants will have to sell their properties, it should be next year already.

Good friend: Surely some of them would want to sell their properties.

Charles: Oh, there are definitely many sellers for properties. Within 1H 2020, there were over 75,000 residential property transactions in Malaysia. (official numbers here) There are certainly no shortage of buyers and sellers and certainly the banks are also approving these home loan applications too. However, if you are one of those sellers, would you be selling your property at a cheaper price than the market?

Good friend: Of course I won’t. I am not in any financial distress.

Charles: (laughs). You have just answered your own question about why the property prices are not falling, yet. Not many would be willing to sell their properties below the perceived property market UNLESS they really needed the money.

Good friend: Oh but I heard many developers are giving heavy discounts already.

Charles: Yes, but is that what you wanted? To buy a property from the developer at a super heavy discount which is also given to a few other hundred buyers? Getting the keys at the same time as the other few hundred buyers who got the discount? Trying to sell the property at that time against all those few hundred other buyers?

Good friend: True also but then what about those auction properties then? Those who bought too high previously, definitely the properties are now in the auction hall. Am i right?

Charles: I share with you a real experience. Last year, I was auctioning off a landed property and it was the 4th auction. In other words, the property price is already super attractive since every subsequent auction after the first one, another 10% is knocked off the previous auction price. In the end, there were more than a few potential buyers and the winner bought it at the second auction price. It’s true that there are good deals but we really must take action. Else, when it got too attractive, we will have too many competing bidders.

Good friend: Then, I should buy now? Should I not wait until the market gets better?

Charles: Market is bad, we want to wait for when market gets better. When market gets better, we think we want to wait for clear signs of recovery. When there are clear signs of recovery, we complain why prices have suddenly increase so much within the last few months? Haha. This cycle always continue right?

Good friend: (laughs).

Charles: Property prices are not falling yet is really not a valid reason to wait yeah. Better really identify where you really want to buy. Get ready the funds and actually going ahead and buy if you suddenly found a unit below the market price currently. Else, someone else would yeah.

It was a good conversation. I have not met her for many, many months and she’s one of those millennial friends whom I regard very highly. Entrepreneurial, willing to work very hard to achieve her goals and not afraid of challenges. However her experience with property investment has not been a great one. Properties she had bought has been during the times nearing the peak or the prices per sq ft were a little on the high side. Perhaps time will be able to help her.

She just need to keep her business going because that would be where she earns all her money anyway. Till the next coffee session. Yes, next time I shall treat her since this time, she paid for my breakfast and my tea. Happy understanding why property prices are not falling… yet.

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