By Adlene Hanna
A recent analysis by MyProperty Data showed that investor transactions had increased by 38%, with investor transactions comprising 82% of all completed transactions in 2020. Could 2021 see an upward trend in the property market?
Chief executive officer of Rahim & Co International Property Consultants, Siva Shanker, believes that it is normal to witness a dip in transactions when a pandemic breaks out.
Based on Property Advisor’s analysis of the late 1990s during the Asian Financial Crisis and Nipah virus outbreak, transactions did indeed drop drastically.
A similar trend followed in 2002 during the SARS outbreak. However, in both instances, Malaysians generally returned to the markets in the following year after a crisis.
Siva explained that this is largely due to herd mentality.
“When the industry leaders – the risk takers – start buying again, herd mentality kicks in and as more people buy properties, the market moves itself. That’s exactly how the market fluctuates,” he said.
Recovery starts with vaccination
According to Siva, a sharp increase was originally expected this year, with Covid-19 under control and the rolling out of vaccines.
“There’s a lot of pent-up demand from investors, investment houses and people who refrained from investing last year. Now, we’re into another lockdown with no end in sight, but generally, people are less spooked now compared to the first lockdown. It’s not such a bad situation, but it will stifle demand,” he explained.
Pejuang Hartanah founder, Ahyat Ishak, also shared the same sentiments, saying that markets behaved in three ways – recovery, expansion and crash.
“We are coming out of nine years of decline since the peak in 2011. My medium-term outlook for the property market is that it could be five years before we enter the expansion phase again,” he told Property Advisor.
However, pandemic containment measures such as vaccination will drive economic recovery and thus the property market.
“Vaccination is a must for herd immunity, which can spark a sentiment of safety. It’s the first step towards economic recovery. Employment, as well as micro and SME strengthening are the second step towards economic recovery,” said Ahyat.
Similarly, Siva also commented, “The vaccine is a silver bullet that is not going to kill all our ills, but will certainly be the catalyst that pushes investment forward.”
Ahyat opined that although it may sound like doom and gloom, there are actually many opportunities waiting to be seized. However, he cautioned potential investors and homebuyers to first reflect on their financial situation. According to him, there are three aspects to consider – personal finances, family, and your team, if you own a business.
“Are you in a position of ‘survive’ or ‘thrive’? Crisis is about danger and opportunity. First, we need to keep ourselves safe from danger, only then can we talk about grabbing opportunities,” he stated.
Funding through refinancing
If you are keen but are short of cash, consider options like cash-out refinancing, which allows you to take out some of your property’s equity. Although this increases the total amount of your loan and monthly installments, the excess cash flow can be put to productive use.
However, proper financial planning is crucial. It is also wise to first check how much your property’s value has increased since you first purchased it, so you can calculate how much you can cash out.
For example, if your property is worth RM500,000 and you still owe RM200,000, you have RM300,000 in equity. Taking out RM200,000 could help ease the burden for your new property investment.
What’s more, if done correctly, you can make money off your property investment in two ways – either through value appreciation or renting it out. The latter is a popular option, as it helps many unlock more cash flow in the long run.
2021: The time to invest
Thanks to high supply and low prices, both Siva and Ahyat consider 2021 a good year for property investment.
“It’s an absolutely great year to buy your first home, as well as upgrade and invest. The timing of the market is perfect. Just like buying stocks, it is best to buy when prices are low,” Ahyat advised.
Siva had a similar point of view, advising those with the financial capacity to begin buying now rather than wait for 2022, as prices could go up by 2% to 5% by then.
“If you buy now, you could say that 2% or 3% upside could be yours,” he said.
However, it is still important to think it through, especially in terms of your personal preparation. As Ahyat said, “The market is always ready, but do you have the knowledge, money and advice to go through with it?”