When is A Good Time to Invest? Posted : on 10/3/15

This is the million ringgit question that everyone asks. Should I buy NOW or WAIT? Further to that the following questions are, Will prices come off, How much will it appreciate in 5 years, Will there be buyers when I decide to sell, Will I be able to secure a good tenant?

One would need to gaze into a crystal ball to get all the right answers. Property investments, just like any other type of investments have its risks as well.

These risks come in many forms, as an example, in 1997 when we experienced the Asian Financial Crisis almost every investor was affected. It did not matter what type of investment one was holding, everything took a hit. Interest rates escalated and many defaulted in their repayments to the bank.

Another common scenario is when developers abandon their projects and the investors/homebuyers are left having to service interests in incomplete developments.

Market sentiment is another factor that investors need to be weary of, in situations of this nature, selling becomes difficult and most investors/purchasers tend to adopt a “ Wait and See” attitude in spite of the fact that market conditions may be conducive.

There are a few simple precautions an investor should take note of prior to investing.

  1. If you are buying from a developer, check on the track record of the developer and their previous projects.
  2. If you are buying from the secondary market, check on the condition of the property, prevailing rental values, historical values of the properties in the vicinity and the rental demand.
  3. If possible try and keep your financing to a maximum of 70% of the purchase price. This will make your monthly commitment easier and the rental returns you generate should cover a large portion of your monthly repayment towards your loan. There are many who will disagree with me on this matter as the rationale would be to borrow as much as possible and fork out the minimum amount of cash one has. Cash in hand allows one to seek out other investment opportunities. This is true if you have a reasonably good bank balance, however if one is investing for the first time and is salaried, it would be wiser to take a more conservative approach just so that in the event of any eventuality the repayment towards the loan does not become a burden.
  4. It would be wiser to buy into the secondary market as one will be able to purchase a property that is already generating rent. It also allows the investor to better evaluate his proposed purchase better, as decisions can be based on actual values rather than assumptions. Further to that, it relieves the investor of any further capital expenditure in fit out or furnishing costs.
  5. Depending on one’s financial standing, it would also be wise to invest in prime locations. This is because properties in prime locations tend to be least affected in an economic down turn. Capital appreciation is also better in prime locations.
  6. While a major portion of the investing public are reasonably familiar and comfortable with residential properties, it would also be wise to check on commercial properties, if one has the financial capacity, serious consideration should be given to commercial properties as  tenants tend to stay on for the longer term and maintenance is usually minimal with commercial properties.
  7. Investment Opportunities outside the Klang Valley - While prices of properties have escalated dramatically in Kuala Lumpur, Selangor and at Iskandar Johor. There are plenty of opportunities in Penang, Kuantan, Seremban, Melaka and even the older parts of Johor Bahru. While property prices in these locations have appreciated over the years, they have not moved as dramatically. The entry levels are lower and the risks are smaller.  The point to consider here is that there are many opportunities outside your comfort zone. However proper due diligence must be made prior to the purchase.

The reality about property investments is that one has to take your emotions and place it in a box and leave it in a corner of your home before you start your search and start evaluating on the proposed investment. Property investments needs to be carefully thought through and researched to meet your desired objectives before a decision can be made.

In conclusion, the answer to the million ringgit question is, Anytime is a Good Time to Invest, as long as one is clear about your objectives and are willing to spend time to do a little research.

 

NIXON PAUL

CAREY REAL ESTATE

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