With the recent COVID-19 outbreak and the change of Malaysia government, it is with no doubt that all businesses and the economy is greatly affected. That includes the property market. Previously done analysis and forecast in regard to Malaysia’s property outlook in the coming years are deemed to be obsolete, as nobody could predict this COVID-19 outbreak nor the Movement Control Order (MCO).
However, we have to realise that the property market is cyclical in nature, with booms & bursts that follow the economic cycle – “Expansion” with upward pressure on property prices, followed by a fall in property prices during “Recession” when the market hits the bottom of the cycle, and then “Recovery” when the market build towards the next boom.
What is the Government doing to Aid the Economy?
Since the MCO was announced, the government has taken a lot of actions with a number of measures that would serve as catalysts for financing. Firstly, Bank Negara Malaysia (BNM) reduced the Statutory Requirement Ratio (SRR) to 2% – the amount of funds that banks need to deposit with Bank Negara. This move releases approximately RM30billion worth of liquid cash which banks can utilise for lending.
Overnight Policy Rate (OPR) also got reduced TWICE in a year! The first was on 22nd January, where it was reduced from 3% to 2.75%, and then the next one was on 3rd March to 2.5%. This ultimately, reduces the loan interest which is a sign that the market is hitting the bottom of the cycle.
Is Now a Good Time to Invest in Properties?
YES! It is surely best time to join the real estate game! Not only developers are adding value to their new developments to make them more attractive, but asking price are lower. Investors are able to secure good assets at much lower value, will then lead to better rental yield and capital gain. The only risk factor investors will face is racing against time! Furthermore, the financing environment is conducive whereby investors are able to lock a LOWER spread rate thanks to BNM’s OPR Cuts.
You often hear the quote “Buy Low, Sell High”, which explains why investors who invested during the Sub-Prime Crisis in 2008 profit so much in less than 5 years. In fact, our current economy downturn is very similar to the Sub-Prime Crisis. At that time, USA introduced a USD 2 trillion Stimulus Package and slashed interest rates to near zero. Malaysia similarly reduced SSR from 3% to 2% that time and the OPR was dropped 3 times in 10 months! Did you wish you were one of the investors who invested in 2008? You’ve got a 2nd chance now!
You do not wish to be part the majority of people who will choose to acquire or invest in properties when economy is booming and when they are financially stable. Notice how many people investing in year 2010 to 2013 but these are also the people who now face difficulties renting or selling it off as the market price barely increase. They will have to wait way longer to see an appreciation in market value for their property as they will need to wait for a full cycle of economy boom & burst to profit.
Readers, do hold this theory close to your heart – You should hold & save up more cash when the economy is booming. Then, INVEST when the economy is down! I hope this article benefit you to decide whether you should hold or execute your property investment plan during this trying time.
Do read our article “Insider Secrets: 6 Laws of Property Investment” to know all the factors to be taken into considering when buying a property!