Is there such a thing as a best time to purchase a property in Malaysia?
With the ever-rising prices of property in Malaysia, most people would tell you that the best time to buy a property was yesterday. The sooner the better, because property prices will just keep escalating.
The Economic Cycle
While that might seem to make sense, there are better times to purchase a property than others. For example, properties are much cheaper during a recession. That is when you can get the best deals at the best locations.
That is also probably the only time you might be able to get your hands on an established and tenanted commercial property in a prime location as some owners of such properties might have to sell their properties to finance their businesses or cover their investment losses.
Availability Of Capital And Market Sentiment
During an economic slowdown or a cooling property market, you will have more bargaining power when purchasing a property because of the low availability of capital and gloomy market sentiment. You might be able to negotiate discounts or added benefits on your purchase in such conditions.
However, the downside to that is that it would also be harder for you to sell your properties if you are already holding on to them at that time.
Demand And Supply
In a cooling property market where the demand for new properties is low and there is an oversupply of properties, prices of properties tend to be lower because developers would lower the prices or keep the prices stagnant in hopes of getting as many properties off their hands as possible to cover their costs.
Arguably, it is best to buy properties at those times because you would be able to get them at the best prices.
The Long Term View
However, if you were to take the long-term view of over 20-30 years, when you buy a property would not make too much of a difference because a good property would have appreciated accordingly over 20-30 years anyway.
The Danger Of Over-Leveraging
It is important to note that over-leveraging can be very dangerous.
If you are taking out huge loans to finance your property investments and purchases, then timing matters because you might get stuck in a situation where you are unable to liquidate your properties in time to meet your short term loan commitments due to a cooling property market.
If you bought a number or properties when the property market was at its peak and are unable to sell enough of them to cash before the market cools down or crashes, you might not have enough cash to service the huge loans that you have taken out to finance these properties. You could even end up bankrupt if the banks are unable to auction off the property at a good price due to the bad market.
Hence, it is important to not over-leverage when investing in properties.
Personal Consumption Vs Investment
If the reason you are buying a property is for your personal use, anytime would be a good time since you probably don’t plan to sell it in the foreseeable future. In that case, the best time to buy a property would be whenever you can afford it and the sooner the better.
However, if you are buying a property for investment purposes, then it might make sense for you to take into account the timing of your purchase so you are able to get the best deals and make the biggest gains over time.
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.