An Investor Guide To Real Estate: Understanding Market Forces To Maximise Your Real Estate Journey

A consumer survey conducted earlier last year stated that more than 50% of Malaysians are keen on purchasing real estate in the coming year. This is naturally good news for the real estate market that has been hampered by the pandemic for the past two years.

This shift of perception is undoubtedly due to current market forces. As the world enters a post-pandemic phase, many are now regrouping and rebuilding their finances and wealth. According to the Department of Statistics Malaysia, the national inflation for the year 2021 showed a significant increase of 2.5%. It is more than double the 1.2% registered for the same period in 2020.

With the prospect of a growing inflation rate, real estate has always been viewed as a stable and viable option for investment compared to a volatile stock market. Regardless of if it’s a property being purchased for rental, or long-term appreciative value, there are many positives involved when buying a property. Plus, it’s also never wrong to have a roof over one’s head.

However before you rush out and start buying up a piece of property in the hopes of yielding some capital gains, it always pays to understand what it is you’re buying. After all, real estate is a long-term investment and unlike liquid assets stocks or bonds, it cannot be sold and converted into cash quickly. Here are some important guidelines to consider before jumping feet first into a real estate purchase.

Use Data To Understand The Market

“Location, location, location” may be the determining factor for property value (it still is) but in the modern era, it could be replaced by “research, research, research”. Putting in the time for research will assuredly guarantee you a better property buying experience. Consider factors such as areas with an oversupply, which can hamper the appreciative value of your asset.

Also look at capital growth or price trends of the property or the area you are considering. Some areas remain hotspots for property such as Mont Kiara, Bangsar and Taman Tun Dr Ismail (TTDI), as such, prices continue to be stable and consistently high, which bodes well for a long-term strategy.

For upcoming areas, such as townships it pays to study the master plan. Look at its amenities, township plan, accessibility as well as surrounding projects, which may boost property prices in the area as it continues to develop. Word to the wise – don’t just rely on data sourced from the internet. Hop into your car and pay a visit to these properties yourself and if possible, speak to the people (your future prospective neighbours) to get a better insight into the property/neighbourhood you’re buying into.

Understand Changing Consumer Behaviour

A volatile and uncertain economic outlook will certainly change consumer behaviour. For instance, there is a growing trend amongst consumers to rent instead of buy. Although most would still prefer to outright own their home, there is an increasing segment of rental-focused consumers.

This primarily due to many not wanting to establish a long-term financial commitment. Rental rates in Malaysia are relatively cheaper compared to a mortgage. It also provides an easy and quicky way for many to get the residential space they want instead of shopping around and navigating the red tape of buying such as loan, sales and purchase agreements etc.

The pandemic has also transformed the mindset for some consumers. For the past two years stuck within the confines of their homes, the appeal of landed properties continue to grow. According to Bank Negara Malaysia, landed properties in particular terrace houses, saw a 29% increase in loan application types last year.

Economic Conditions

A strong economy equates to an increase demand for housing. A recession will prove otherwise. With slow economic growth, inflation and rising unemployment, property prices will begin to soften, resulting in properties being sold below market prices. This can prove beneficial for prospective buyers as they can now purchase a prime property below its valuation, as long as they have the cash flow to support it until the market eventually recovers.

With the rising dollar along with supply chain issues involving materials, construction costs are also increasing. A survey by the Real Estate and Housing Developers’ Association Malaysia (Rehda) claims that construction costs can rise as much as 19% this year. This could impact property prices in the near future along with increased expenditure for those looking to renovate their existing properties.

Buy For The Right Reasons

A dream home can quicky turn into a nightmare if one’s not too careful. The first rule of thumb is to always purchase within your means so that you can minimise the financial risk. Also make sure you are purchasing the property for the right investable reasons.

If you’re banking on a property for short term gains and to gain some passive income, then perhaps it’s prudent to look into purchasing a rentable property. If you’re looking for a forever home, then with the right research and leg work, you may well find one to realise your dreams.

These are just some of the factors that should be considered when embarking on a property journey. So do make sure that it is one that is able to fulfil both your financial and lifestyle needs so that you can capitalise on your sizeable investment.

Discover more insights for your property journey with here.

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