Property Investment: Best Time, Worst Time, Some Time
1998: Best Time or Worst Time?
If someone were to start investing during the worst time, say the 1998 ASEAN financial crisis, this person would have gained tremendously whether she bought into the stock market (some counter which is earning profits), property (prices in 1998 vs today?) or even the unit trust. 1998 till today is around 23 years. Her investment would have easily tripled or more. Was that the worst time then? To the one who invested, it was the best time.
2008 – 2013: Best Time or Worst Time?
If someone were to start property investment during the booming years and she happened to buy towards the end of the booming years, then this person may need to have the power to hold. This is because after 2013, the property prices have not been the same as the 5 years before 2013. This meant that investing during good times, does not necessarily give good returns. Okay, unless that someone managed to invest into some undervalued properties even during good times.
Actually, no matter what is the time, property investment over 20 years for example, the total number is always up. So, perhaps we can do three things instead?
#1 – Look for Opportunities
For people who have not bought a property, the best time may yet to come—hopefully, it will be one day soon. For now, they are still waiting. A senior management of a top developer in Malaysia once told me that the best time was 20 years ago; the second best time may just be today.
For seasoned property investors, the best time is when they find a distressed seller selling below market value. It may also be a property they found in an auction where there are no other bidders and the property is 20 percent below the market price! These seasoned property investors almost always keep their eyes and ears open for any potential opportunity.
#2 – If we are over-stretching ourselves to buy, that’s not clever ANYTIME
When is the worst time to buy a property? For a first-time home buyer, the worst time may be during some crisis right after they bought their first property. During a crisis, the prevailing sentiment is negative and they may find out that the property they paid for RM400,000 just a few months ago is now in the market for only RM360,000 or lower.
This is why if we did not over-stretch ourselves, we should be able to hold if indeed there were unforeseen circumstances. Recovery will come soon after. Past crises have shown that recovery is a certainty here in Malaysia. From the 1980s to the 2008 US subprime mortgage crisis, nothing has bothered our property market for more than a year or two.
#3 – Missed opportunities? Look for the next one yeah
For a property investor, the worst time is when they could have bought but did not. I still remember the time I bought my first condo in Penang. The size was 1,258 sq ft and the price was RM247,000. After buying that one, I booked another unit for RM256,000. However, in the end I did not proceed. This unit, I sold at RM640,000 8 years later. If ONLY I bought the other unit too… right?
Then, there was this condo purchase in Kelana Jaya. The year was 2007. The units were over 1,000 sf and most units were below RM200,000. I bought just one for RM183,000 and wanted to buy another unit at RM192,000. After negotiating, I could not get the price I wanted and the transaction did not happen. Fast-forward just a few years later I sold my unit for RM460,000. If only I proceeded with the second unit…, right? It’s okay, next one please.
Not so awesome is this: Maybe Sometime …
I have friends who tell me that they will be buying a property “some ” in the future. When asked when, the answer will always be vague, and the “sometime” never turns into the first time. If we look at advanced property markets in the world today, the fact remains that without a property to our name when we retire, it will be a tough time. Property may just be the ticket out of poverty in many countries.
In Silicon Valley, for example, the monthly salary of a security officer is US$2,400 but he would struggle every month because of property. The typical rental for a one-room place is US$2,400. He could share a room with others, but I am worried for him when he gets old or when he has a family.
Remember, when we retire, our income stops and it’s going to be a struggle paying for rental every month. However, if we turn that “sometime” into “the first time”, the property would have been completely paid for at the end of 30 years.
By the way, a RM200,000 property at just 2% increase per year will still become RM500,000 at the end of 30 years. It’s very true that inflation would have eaten a lot of the RM300,000 increase in value, but I want to also remind everyone that not many Malaysians could save RM500,000 in their bank when they retire. So, better do it with a property…
Be Ready for the time
The best time to buy is when we are ready to buy. The worst time is when we have spent everything we have every month and then we find a property we’d love to buy but have to abandon the idea because we just could not afford it. Please discard the “sometime” thought and focus on making that first-time property purchase a success. Be ready for the time, when the time comes.
Next suggested article: Can banks help to stop the potential for property bubble?