Yesterday during a FB LIVE session (click here to view), this question came up a couple of times. “When will property prices be falling?” or “Will COVID-19 cause prices to fall?” Briefly, for those who are waiting to buy a property for 20, 30 or 40% below the market, they will have to wait longer. The latest forecast says that Malaysia’s non-performing loan to peak at 1.7% or 1.8% for 2020. This was a forecast by S&P Global Ratings What is 1.7% of 1.8% then? Is it high or is it low?
Using very simple analogy, the bank lends RM100 out. RM1.80 turns into bad debt. Of course, if it’s a housing loan, then the bank could still auction the house to recover the debt too. What 1.8% at the highest point is showing is also that most borrowers (nearly everyone) are still able to pay their mortgages. If they could pay their mortgages, what are the chances of them suddenly thinking of selling their properties at lower prices?
Perhaps we could ask ourselves this question. If we could still pay for the home, would we do fire-sale for the home or not… So, the first reason why we may fail to buy that property we wanted is because unless these owners become desperate, they are not going to sell their properties at 20% below the market… If we want to buy properties which are priced 20% below the market, we need to wish for many of these owners to go into desperation mode. Hopefully not.
Second reason? We assume that there are a number of these owners who are really in trouble and wants to sell their properties by 20% below the market value. If the person happened to be a your close family member, they may tell you FIRST. So, you get to buy that property at 20% below market price. However think about it, how many of these desperate sellers are your close family members? So, if they are not your close family members, they will sell to THEIR close family members… or their neighbours… or even that real estate negotiator who’s also a property investor too. Certainly not to to you… because they do not know you.
Third reason? There are just not enough of these below the market properties to go around yeah. You see, in some areas, the prices could already be 20% below the market but not many buyers. In popular areas however, as soon as there are a few of these 20% below market price properties pop up, there would certainly be a long line of potential buyers. One of my close friend, a Gen-Y saw a new property listing at the condo she was staying within a few minutes the listing was posted online. It was 10-15% below the market price. She called and took a two hour time off to view and immediately pay the deposit for it! So, how many of us watch the property listings every other minute…?
There are a lot more reasons but perhaps a better waiting game is also by befriending many good real estate negotiators who may tell you about such a good deal first before they tell others? It’s also vital that you have already understood the area you intend to buy and the market price yeah. As soon as an opportunity comes along and you want to think about it, someone may have bought it first. There is no time to investigate and research because when the property is truly attractively priced, the window to buy is really a small one. This is why we need to stop thinking that we can wait and wait and wait because someone told us that it is currently the buyers’ market. So, all owners are surely desperate to sell their unit to us. Happy understanding and I do wish you could get that unit at the area you want at the price you truly wanted okay. Cheers.
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