Using emotion to decide whether to invest or not to invest? Do you feel lucky?

Using emotion to decide whether to invest or not to invest? Do you feel lucky?

When property market is lukewarm, most people stay out

I am very serious and I have MANY friends who have told me so many times that they are waiting for the best time. No one knows when is the best time but it does not matter. They want the best time to enter the stock market (when BURSA is already red hot…), the best time to buy a property (when every Tom, Dick and Harry is already talking about property), the best time to have baby (Yes, Year of the Dragon for example…) and more. Not many look at things logically and maybe objectively…

Logically, when someone is earning enough to qualify for the home loan, when the interest rate is already like one third of the interest rate during the highest point, when the property is at a good price point and not some inflated numbers, when we have viewed 20 properties and found a few shortlisted ones, we should proceed to take action and buy… no? Yes, you are right, the answer remains a No.

Listen to logic please?

Fortunately, there are some who would take action(s). I remember very clearly when someone told me that I am foolish to pay RM247,000 for a condominium when for an extra RM50,000 or so, I could buy a landed property in Penang. I explained that condos are not built when there are still big land parcels. Condos are built because there are only pockets of land left in some mature neighborhoods and unless we want to stay very far away, then we can buy the landed properties, else, a condo is a good choice.

Besides RM247,000 for 1,258 sq ft means less than RM200 per sq ft. There’s no way developers can build at this price in the future due to ever increasing costs. The reason why some developers could was because the bought the land parcel a VERY VERY long time ago. Anyway, my brother and brother-in-law believed and bought and today, both are sitting on units which has appreciated while that same friend who said I was foolish…? Well, I have not seen him for some time. He’s staying in a condominium too… but he bought it for much, much, much higher price per sq ft…

Do not wait for the best time or best price, look for one which is of good value

Property investment is slow lah. We buy a unit, we may only sell it like many, many years later. As long as we did not buy at the wrong price point, we will be just fine. Prices aways move up because salaries always move up. If our salary did not, there are others whose salaries are moving up. These are all potential buyers in the future. Please remember that when food prices keep going up, everything else would just follow because when food prices go up, salaries must go up or else, how to buy that food…? When salaries increase, of course people can afford to pay slightly more for monthly mortgage.

Remember, RM100 extra in home loan every month equals to financial capability to afford an increase of RM20,000 in price yeah. Take a look at the calculation below. A RM500,000 home has a monthly repayment of RM2,148. Meanwhile a RM520,000 home (which is an increase of RM20,000) has a monthly mortgage of RM2234. This is an increase of RM86 per month. Hope this explains both financially and logically why increase in salary pushes up the ability to afford and when ability to afford goes up, the property price will just move to the level people could afford.

How to stop property prices from increasing?

Stop inflation. Do not allow the food seller to increase their price. Thus, salary does not need to increase. Thus the financial capability to afford a higher monthly mortgage will not be reached. This will then easily stop the property price from rising any further. Remember, any food seller who increased their price, stop buying from them. Give them pressure to sell at the same price year after year. Cheers.

if you know Chinese, my friend said this about property price movement after she read my latest article. (read here). “Good perspective, but can not rule out there’re 人为 factor..”

Actually, everything is all due to human. Demand and Supply are all due to human actions. Not sure if in future, it will all be due to AI intervention but investment decisions, especially when it comes to property investment are all due to the human factor / actions. Nope, I could not read the two Chinese words but I have google translate and I speak fluent Mandarin too, so yes, I understand her meaning.

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