Property investors, sellers and buyers constantly ask themselves what is the best thing they should do in the current market. There are many options available so let us explore some of them together.

Property Buyers

Take Advantage of Low Mortgage Rates and Packages

With the BLR adjustment from 6.75 percent just a year ago to 5.55 percent today, this equates to 1.2 percent savings in borrowing interest. Additionally, banks and financial institutions are offering BLR – two percent and sometimes even BLR – 2.3 percent packages which make it even more attractive. Imagine borrowing at only 3.25 percent! What this means is that your monthly commitments to the banks and/or financial institutions is much lower than it was before.

Attractive Packages Offered By Developers in the Primary Market

Property developers today are offering exciting easy ownership packages to property buyers.  The following are just some of them or a combination of:

These are all designed to allay the fears of uncertainties from the minds of buyers especially over the next year or two when the market situation seems uncertain. In better times, all these would be unheard of. Today, you practically take control of the whole property for just five percent of its value. With offers like Zero Interest during Construction, it really means that there are no additional payments from what you have made upon purchase. In other words, even if in the next few months one should lose their job for instance, they will not need to lose the property they have purchased under this programme. Having said that, you will still need to do your research to ensure that you are purchasing at market prices and more importantly from reputable developers.

For property selection, it is always good practice to go back to the standard rule of selection.

It also depends on the perceived value of the property to you and your investment appetite.

The question of whether to buy still goes back to the fundamentals which are firstly to determine what the purpose of the purchase is. This is still the key question. 

Investors/buyers, they need to be clear on these three matters:

Different properties would suit the different purpose and criteria of purchasers.

Hedge against inflation

Property investment is commonly perceived to be a good hedge against inflation. We want to at least be in a position where the value of our money is maintained if not improved with our investments. Property offers protection against loss of purchasing power resulting from rising prices of goods and services to the extent that your equity increases in value at a rate at least equal to or greater than inflation. Research has shown that property values have generally increased at a faster rate than the rate of inflation hence property investments have provided a hedge against the effects of inflation on your return. This has always been the fundamental quality of property.

Sellers of Properties

Take Advantage of Low Mortgage Rates and Packages
The first thing that comes to mind is to take advantage of low borrowing rates by speaking to your bankers to revise your package. Chances are, your packages would not have been as attractive as those offered today. This provides instant savings! Best yet, it takes only little effort to get in touch with your bankers. Should you have held the property for a long period of time, it is also a good time to consider refinancing to these better packages.

Most of us should also be aware that should you be retrenched, the banking institution has agreed to defer the housing loan payments to a period of one year. This one year moratorium period is effective 10 March 2009. This means that you have grace period in times where your flow of income is disrupted by loss of employment. This also gives you time to put the property up for sale, if the need arises. As to the actual working mechanism of this moratorium, do consult your bankers to seek clarification. 

Tenant Friendly
Be careful on the price you are asking or putting on the market.  Potential tenants may be turned away just hearing the rental rates.

In times when you are competing with many others for tenants, it may be wise to go easy on the rents and have the tenant occupy your premise then to hold on to high prices and wait months before your property is occupied. Always work out your yearly returns as opposed to focusing on the monthly rental. It may be well worth your while to rent your unit at say RM12,000 for 12 months then to wait to get RM15,000 for only nine months for the same year. The longer a property or unit is vacant, the less attractive they become.

Compromised Profit Situation
In view of job instability and talks of ‘pay adjustments’, many may choose to cash out on their investments at a ‘compromised profit’ to ensure that they go through this period without incurring too heavy commitments on mortgage and such. Those who are able to hold on to their property investments, with a buffer to service the mortgage for a period of say one to two years even in the absence of rental, is on a safe path to sail through this uncertain time. It will be worth your while to keep the investment should you have purchased them at good prices i.e. KLCC condominiums for RM600 per sq ft in the ultra prime areas as it is highly unlikely that you will be able to pick up units at these prices save through ‘fire sale’ situations which we normally just hear about and seldom have the opportunity laid before us.

Should you be concerned about the uncertainties of your employment or business performance in light of these global uncertain times, which you feel will affect your ability to service the loan repayments, then it may be worth your while to cash out even at a ‘compromised profit’ situation especially investments in the more speculative markets to ensure that you ride this period through comfortably. You must remember that putting your property on the market today does not mean that it gets sold immediately. There is a timeframe involved before the property is sold and you get the proceeds.

Conclusion

When we look at property investment, we have to always remember that property investment is for cash flow and for the long-term. Avid property investors know that no matter what climate the property market is going through, as long as they are in it for the long haul, they will reap the benefits of investing in property. It is known that long-term property investment is one of the best and safest ways to get high returns on an investment. There is no doubt that property has always and will always be an essential part of any serious investors’ investment portfolio.