Wishing you a happy new year 2016! How is your propery investment journey coming along? My wish for you is for your portfolio to grow year on year. As usual, at beginning of the year, my friends and fellow investors will come and ask me about my thoughts on the property outlook for this year? And their question is “Should I buy or should I sell?”
The year 2015 was a challenging year with the implementation of GST, gloomy economic outlook and political instability. Now, let’s crunch the numbers and statistics and ask the next big question – what is the property market outlook for 2016, particularly in Penang?
In overall, Penang’s performance was fair as compared to the other major property market i.e. Klang Valley and Johor Bahru according to Property Indicator by WTW Research (Figure 1). The Penang’s residential property prices is still on the uptrend while the residential property prices in Klang Valley and Johor Bahru remain flat. Point to note is that the declining prices for high rise residential in Johor Bahru is due to the over supply in the Iskandar region.
Figure 1: Property Indicator
Now let’s focus on the performance of residential properties in Penang. Due to the various cooling measures implemented, challenging economic outlook and weakening sentiment, the Penang property market is not spared. This is demonstrated by the consecutive quarter-on-quarter decline in the residential property transactions since 2013 (Figure 2).
Figure 2: Average transacted price vs volume
It was observed that the property transaction volume declined from Q3 2014 to Q3 2015 especially on the Penang Island. However, on the contrary, the value of properties have some how maintained or increase marginally, which means that the property prices on the island is still on the uptrend.
Adding to the current property market woes is the tight credit control environment. This has resulted in a high loan rejection rates from the bank, which forced many home buyers and investors at bay. According to a Savills Research (Figure 3), approximately 50% of loan application is rejected since year 2010.
Figure 3: Residential loan applications and loan approved
Moving forward in 2016, the market sentiments will be no different from 2015. As long as the cooling measures remains and economic outlook is less than promising, the residential market will remain sluggish. And distressed.
As a property investor, how do we strategize for the year 2016? Notwithstanding the above, is the property market going to rebound and pick up again by 2016? Or even 3 years later by 2019?
For me, now is the good time to buy. Why?
In the current distressed market, there is opportunities to grab good deals. As a smart investor, look for bargains and below market value (BMV) properties now in the market. Individuals I am currently coaching found properties that is 20% – 30% lower than the market value. Essentially, these group of people will make money when they buy.
The market condition we are experiencing now is almost similar to that is the year 2008-2009 sub-prime crisis where the market is quiet and opportunities abound. Even property developers are more willing to offer better packages. I was reminded of the quote by Warren Buffet “Be greedy when others are fearful and be fearful when they are greedy”. But then, something is stopping you. What? Do you fear the uncertainty?
Then, what better way to counter that than to learn more and research more. Learn and research about the property market, do the math on the rental return and bang! You are ready to take on your next property.
I’m now a better investor than I was four years ago, all because I was ready to unlearn and relearn. I re-learned the fundamentals of property investment and used the no money down strategy.
I do share about my property investment journey and at the same time reveal to you the 5, 2, 1 secrets of property investment. At the end of my talk, you will take home with you your personal Property Investment Roadmap. If you would like to meet me in person and take home your Roadmap, check out our calendar of events here.
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To your success,