According to data from the National Property Information Centre (Napic), 18,908 out of 81,894 residential and commercial properties launched in the first quarter of 2016 have yet to be sold.
Together, the value of all the unsold properties amounts to close to RM9.4 billion and represents an increase of 15.9 per cent from the value of unsold units in the fourth quarter of last year (2017).
A Slowing Property Market
Quite clearly, the property market in Malaysia starting to slowing down. Many experts believe that this is due to the dampening economic conditions facing our country as well as the tightening of financial regulations.
Many property agents are also reporting drastically lower sales than previous years, with some even considering quitting the profession altogether because they are not able to make ends meet.
With the higher cost of living and uncertain economic conditions, many people are putting off property investments for fear of not being able to service the loans should anything bad happen or not being able to make a decent return on investment.
Be Greedy When Others Are Fearful?
In light of such information, should we heed Warren’s Buffet advise to be greedy when others are fearful, or sit and wait to see what happens?
If you have extra cash lying around (enough to pay the downpayment and service a couple of years of mortgage repayments) and are in a strong financial position, it might be a good idea to invest in prime properties that are going on the cheap right now due to the slowing property market.
Opportunities Presented By The Slowing Property Market
With a slowing property market, developers are willing to offer plenty of freebies and incentives to get their units off their hands. They are also willing to not increase the prices of their new units with each new phase as they usually do in hopes of driving more sales.
At the same time, owners of existing properties are also willing to let go of the units at a much cheaper price.
Strong Negotiation Position
With a decreasing amount of capital flowing around, tightening financial regulations and a lower demand, being able to secure a loan and afford a property today would put you in a strong negotiation position.
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If you were to buy a property today, it is likely that you would be able to negotiate a good deal and get properties in prime location and of good build quality at bargain prices with plenty of freebies and incentives thrown in.
Opportunity Costs To Consider
However, if the slowing property market is a premonition of an economic recession that is coming, then you might want to consider whether you would have enough cash to left to take advantage of the coming recession if you were to invest in properties now.
You would also need sufficient cash to prepare for potentially low rental demand and being unable to let go of your property at a respectable price for the coming years until the property market and the economy recovers.
Should You Buy Now?
If you don’t have much cash now, there is actually nothing much you can do to take advantage of the currently slowing property market.
However, if you have already built a strong and diversified portfolio in other investments and have enough cash to go long on your investment and take advantage of whatever opportunities that might come later in the stock market, then now might be a good time to get your hands on properties in good locations that are going at a low price.
DollarsAndSense is a website that aims to help people make better financial decisions, one interesting bite-sized article at a time. Like us on Facebook to stay in touch with our latest article.
DollarsAndSense Malaysia is a website that aims to help people make better financial decisions, one interesting, bite-sized article at a time. Like us on Facebook to stay in touch with our latest articles.