Duration a big factor in property investment
KUALA LUMPUR : Decision on when to invest in property should take into account the type of property and the duration of investment, said VPC Alliance (M) Sdn Bhd managing director James Wong.
Purchases of second homes, shop and holiday resort were suitable for short to medium term. while long-term investments could be agriculture or plantation land, first home purchases and hotels, he said.
Wong said timing was critical in investment and there were various options such as buying property at the peak or the bottom of the cycle.
“There are four stages in a property cycle – bottom, growth, boom and decline. In reality, the property cycle does not run in such manner as there are cycles within cycles,” he said at the Fiabci Smart Investment in Property Seminar IV held last Saturday.
Wong said the Malaysian property cycle between 1970 and 2004 had three boom periods – from 1973 to 1975, 1978 to 1981 and 1995 to 1997 – and two bottom periods – 1984 to 1988 and 1997 to 1998.
“Property cycles do not necessarily go through all the four phases. For example, after growth in 1993, the property marker was in a decline before it boomed two years later. In 1997, the property boom went straight to bottom due to the Asian financial crisis,” he added.
He said different property sectors could also be at different phases of the market cycle concurrently.
On whether there was any benefit in timing investments according to market cycles, Wong said as the property market was dynamic, people would still buy at any phase of the market cycle.
“Timing depends on the type of property and this is further modified by changing trends.
“Price can move up or down depending on sectors. Residential properties are more resilient than others. Change in property price is also affected by location.
“Besides, when there is market demand for better designed houses or different concepts, buying is influenced by product innovation instead of timing,” he added.
Wong said for first-time buyers, timing was a less important factor compared with location.
He advises house buyers to look for “pull factors” such as planned or established hypermarkets in the vicinity, and identify population movement and trends, and new growth areas.
“Do not time buying decisions at the peak or bottom of the property cycle. Instead buy when the market is experiencing an uptrend and sell during a downtrend,” he said.
Source :The Star 8/8/2006 Close Window