Shed your conventional tactics, and try out these real estate investment strategies for healthy returns.
As cost of living continues to climb on the back of dismal income growth, it is no wonder that many young Malaysians fail to qualify for home loans. Even developers are getting increasingly creative when it comes to strategising new launches and creating payment schemes for those struggling to obtain financing from banks.
While economic indicators such as the household debt have improved, it is anticipated that the strict lending requirements will persist. Thus, the need for property investors to switch gears. Warrick Singh, Director of Asian Land Realty Sdn Bhd shares some of the economic signals to look out for and the best strategy that will guarantee good returns.
Price is what you pay, value is what you get
There is no universal blueprint for property investing, but sophisticated investors will tell you this: they are looking not just for growth, but sustainable growth. Hence, they depend on statistics to ensure results (value), whereas unsavvy investors are motivated by price.
“Property market cycles influence the difference in value and price, a property’s value is judged by its highest and best use. Currently, the prices of most properties are higher than the value due to the affordability issue and demand-supply gap. The current economic climate does not support a robust tenant market,” explained Warrick.
‘Profit-seekers’ with a short-term approach to property investment will snap up primary and secondary properties just because it is being sold off at a discount. Those investors who are unable to obtain tenants will see their units (assets) turning into a cash sucking liability.
The effects of this misguided behaviour are already visible; many over-eager investors purchased properties during the Developer Interest Bearing Scheme (DIBS) era between 2012-2014 without doing any due diligence. Consequently, many investors who cannot keep up with their monthly repayments are now seeing their properties being repossessed.
Take the road less travelled
So what are the alternative investment opportunities that investors can capitalise on in a bottoming property cycle? Look at rent-to-own schemes or venture into land banking through group purchases. The former does not require any capital to get involved whereas the latter is a good strategy to hedge your money against inflation.
For land banking, aspiring investors should look at group ownership to reduce the cost of capital. Future growth areas such as the Eastern Economic Region and Bandar Malaysia as well as agricultural land zoned for township developments are promising options.
Auction to take centre stage
Besides that, investors should try their hand at auction properties as the number of units going under the hammer has risen exponentially in the past year.
Nevertheless, investors should take care to sift through and select value-added units. “Take the time to study a particular property not only for gains in price but for stability in rent, its location and overall quality of the neighbourhood,” he cautioned.
Written by Reena Kaur Bhatt/ Edited by Mira Soyza.