What Has 2016 Planned for Us?
2015 was full of challenges for the real estate industry, but we have survived some of the biggest challenges thrown at us. As we usher in 2016, everybody is eager to know how the market will move in the New Year. Will it warm up or worsen? Will price continue to rise due to increasing cost or fall due to poor sentiments?
The current state of the real estate market is a reflection of the greater challenges that Malaysia is facing in the economic sphere. Low oil prices have significantly eroded the earning powers and this far in purchasing powers has trickled down to various industries.
The slowing of China’s economy has also taken some shine off Malaysia’s economic performance, but the impact is expected to be kept to a minimum as our main exports to China (electrical and electronic, oil and chemical products) are not significantly impacted.
Recent US rate hike puts Malaysia on the moderate risk but our exposure is not as signiticant as other Asian markets such as Hong Kong and Singapore, and we should be able to soldier on without much problems. The devaluation risk of the ringgit is also kept in check and there should be no significant movements as previously seen.
Subsale Market Beckons
The fact remains that 2015 was a state of rapid cooling for the market and the situation is expected to persist. But as Warren Buffett famously said; “Be fearful when others are greedy and greedy when others are fearful.”
While the sentiments might be weak, there is no doubting that we have entered into the “buyers’ market” era and it might be a good idea to reassess one’s strategy in this trying time.
It may be surprising to some, but ‘data shows that at least 70% of the real estate transaction in the market comes from the secondary market. The silent majority is mainly due to the lack of advertising and promotion in this market sector compared to developers’ efforts for new launches.
Although there are not as many rebates and concessions on the subsale market compared to those provided by the developers tor new launches, it is often offset by the generally lower list price of between 20% and 30% compared to new launches in the vicinity, which can be due to various reasons, including the cheaper purchase cost which makes it cheaper even when factoring the price appreciation.
It is understandable that many buyers are very concerned about the upfront cost of buying a property, but careful calculation might show that the long- term cost of a pre-owned home to be lower. Beware and research are the two important words investors need to live by, particularly in this market condition.
Seeing Is Believing
One benefit of buying an existing house is that one can see the building live in action, and access the build quality as well as the existing resident community for a clearer picture of the actual lived-in condition.
It is also worth noting that many of the properties launched in 2012 and 2013 are nearing completion and there are bound to be some greedy speculators whom have bitten off more than they can stomach during the market bull run. In view of the slow market and the introduction of the RPGT, there is a chance that these speculators might have to take a huge discount to offload or rent out their property to reduce their holding pressure.
Why not try looking at properties in proven locations such as Bangsar, TTDI, Hartamas, KLCC and Brickfields as there is more room for negotiation under such market condition? It is true that the properties in these places are indeed more expensive, but they have also been proven to be an excellent store of value. This is in fact one of the best times to shop in these coveted locations for those who can shell out the asking price (albeit with some discounts),
Don’t Buy for Tomorrow
There is no doubting the huge earnings that can be enjoyed during a bull run in the market and many shrewd investors have already reaped the fruits from their investments over the past couple of years. However, we should not be distracted from the fact that investing in real estate has always been for the mid to long term and as such, investors need to adopt the right mind set with regards to the proper time frame for their investments.
Look at the macro picture and development plans across key areas within the key economic development regions, whether it is in terms of commercial, industrial, tourism, education and other key growth industries. Those with sustainable economic growth will enjoy long term performance, especially when coupled with a growing population.
Those who plan to hold properties on a longer term of at least 10 years will be well insulated against the market fluctuations as economic cycle will come around and iron out any short to mid-term dips. Do not buy just for tomorrow, but for a longer time horizon.
A longer time frame also meant having the ability to buy into the future’s location. Simply put, areas that are at the infancy of development can be had for a good price compared to established area, so choose carefully, paying particular attention to the transport network and road way evolution.
Assessing the development movement is a highly specialised field of study but there are resources available on the market and knowing how the map of the region will evolve is a huge advantage when it comes to sourcing for a good investment. Experts whom have successful determined the alignment of the MRT project at the early stage were able to accurately identity areas of potential growth.
At the end of the day, always remember that a house is meant for the family first, investment second. So priorities a place that you and your family are able to experience a higher quality of life.