Current Situation: Masa sudah Time?

Q.
My colleague and friends ask me "Is now the right time to buy?"

A.
Many of us who work in a 9 to 5 job are familiar with the phrase "Masa sudah Time".

Masa - in Malay is 'Time', hence it is a repeat of the meaning of "Time is Time". What exactly is this about in this article?

I want to bring across the concept of 'dynamics of business' into your strategies of 'Timing'.

Let us set our arguments to a fix set of bases - property stock, supply and demand, we keep to the minimum arguments of macro-economics factors like fiscal and foreign exchange forces.

Let us go back 3 years - 2012, the property market was seeing glut, and government started to introduce measures to curb over heating.

Let us go back 6 years - 2009, the property market was booming, and speculators enter into market with strategy of 'flip'.

Let us go back 9 years - 2006, the property was starting to catch up. There was hope that old stocks could be get rid of by developers.

So, if you think in a chronological manner - the stocks of 2006 should have been sold.

So, if you think in a logical manner - the current stocks of properties should have been accumulated after 2009.

So, if you think in supply and demand, and stocks current held in the market - i.e.more supply vs demand, the price should come down.

It the above arguments valid?

First 'Masa' - the answer is yes. What we are seeing is the current stock holding from previous overheating. And, the market is saturated with some old glut.

Second 'Time' - the answer is no. Why? Because it is a dynamic stock indent. The developers despite holding some stock, are also building new projects - in KL, it is called 'Greater KL'.

Hence, 'Masa sudah Time' is the purpose of this argument. The scenario is a dynamic one.

On one hand, there is old stock, and on the other hand, there is new incoming supply. So, the whole property market is fighting for the same group of buyers.

As a buyer, how could you take advantage of this situation?

Remember 'Masa sudah Time?' The first is Masa, the second is Time.

For the first 'Masa', there can be gems. The is possible based on 2 major factors:

1. The holding of old stock means it was in old price - like you buy any item in the supermarket.

2. The pressure of old stock getting expired - meaning that the sellers are welling to let go just to clear stock. It is probably like 'Stock Clearing - Closure of Outlet!'

For the second 'Time', there also can be gems. The reasons are:

1. The developer in order to cope with the falling prices - start building more affordable homes.

2. There is a trend to move in a concerted effort (among all developers) to promote a medium range property where competition is able to curb ceiling prices among the different projects.

But,

The newly built or launched projects are subjected to higher cost - especially post GST.

Therefore, inevitably the new stocks are going to depress margins for developers. So, the quality, density and floor space (sqf) will be compromised per unit cost. Therefore, primary market would see lots of similar projects going after the same buyer. This in fact, will allow potential buyers a shopping frenzy.

On the other hand,

The second market (stock holding by speculators investors) would see some desperate conditions on the high ticket items. It is easy to understand that if you are holding 2 units of luxury condominium costing you RM4-5K installment a month, that is a monthly outflow of RM9-10K cash! Most people cannot sustain this credit crunch in a stagnating economy - facing further pressure of foreign exchange of losing Ringgit.

If you are trader who import foreign products for sale, what do you suffer most now?

Higher cost of imports! Coupled with slowing down of sales, right? So, your first response would be to cut down expenses. The most significant would go first, definitely.

Before you can start firing people, you would look at your cash outflow - first to tighten would be the heavy monthly bank installments!

Probably second would be the Foreign University education that you loved ones are attending.

So, now you can see the pressure of holding on stocks. Be it trading stock in your warehouse or the warehouse that you own. In this case, your 2 units of luxury condominium. Anyway, you are not staying there as you already have your 20-point bungalow.

In such situation, any Tom Dick and Harry would have to contact his estate agent to start selling the luxury condominiums.

However, it is not that straight forward! Why?

The current market is 'on sale'! The Greater KL project is also on the dinner plate! Worse, people are not eating out due to the depressed market. So, you need to compete with the competitors - Greater KL and other smaller launches. Furthermore, there is this 'others' who are like you - once splashed with the 'flip' fantasy.

As a whole, the secondary market is also slow as the general sentiment of the property market is depressing! Agents are even forced to 'gulung tikar'!

So, what do you think? Isn't it good timing for buyers now?

Reflection

The dynamics of property market is just like any mini-market or sundry shop.

You have to compete the old time with the new time. Old time being largely your own stock holding. New timing is your competitors and the reactions to the current situation.

For a strategised investor, this is the time to look at secondary market. Why?

The old stock cost less, especially before GST. This refers mainly to secondary stocks.

Over and above, the developers are resource rich but not individual investor or speculators. The big time developers can withstand the current slow down better than individual investors and speculators.

Hence, the better deals are in the secondary market mainly because of this holding pressure. Those most desperate sellers are facing credit crunch, and now you are there to relieve their worries. You are able to pick and choose good properties. Hack a good price!

Ref:
Owo account.