By Joseph Wong
When it comes to property investment, the age-old saying timing is everything has echoed through the halls of real estate for years. However, is timing truly the key to a successful property investment or is there more to the story than meets the eye? In truth, there is a common misperception that timing is the linchpin of property profitability and there are a myriad of factors that actually play a role in the real estate market.
Many potential investors and property buyers continue to believe that timing the market is the secret to reaping substantial profits from real estate. This belief often leads them to adopt a wait-and-see approach, anticipating that a better opportunity will come knocking if they are patient enough. However, seasoned investors know better. They understand that it is not just about timing but time itself that can make or break a property investment.
Peter Yee, a property investor and the founder-president of the iAuthors club, once told this writer: "The best time to buy property is yesterday and it's not as good today, even worse tomorrow." Yee's assertion emphasises the significance of taking action promptly when it comes to real estate. Delaying a property purchase only contributes to an escalation in property prices, ultimately making it more challenging for potential buyers to enter the market.
Using an analogy to the wisdom of planting trees, an adage Warren Buffett himself has endorsed: "Someone's sitting in the shade today because someone planted a tree a long time ago." While not everyone will live in the same house for their entire life, the principle remains: Property investment should be approached with a long-term perspective.
Property investor, public speaker, and author Ahyat Ishak is always quick to remind that property values generally appreciate over time. However, he cautions against relying solely on this premise to guide investment decisions. In many of his talks, he tells potential buyers and investors to dig deeper and base their choices on solid fundamentals. Factors like a developer's reputation, affordability, location and potential for growth should be considered.
The property boosters that can enhance a property's appeal and potential for appreciation include population growth, infrastructure developments, proximity to educational institutions, healthcare facilities, and areas attracting industries and job opportunities. While property values tend to increase over time, it is essential to look beyond this generalisation and consider these fundamental factors when making investment decisions.
It is crucial to acknowledge that property values do not follow an unswerving upward trajectory. Economic fluctuations can lead to downturns in property prices. For instance, from 1981 to 2018, Malaysia experienced negative economic growth in 1985 (-1.1%), 1998 (-7.4%) and 2009 (-1.5%). During these economic downturns, property prices could also experience declines.
While property values generally rise over the long term, this is not foolproof. Year-to-year price drops have been recorded, depending on the financial well-being of the buyer or investor. In 2018, high-rise and detached homes in Malaysia experienced -1.2% and -1.8% changes, respectively, in the Malaysian House Price Index (MHPI). This marked the first time these two residential property types saw negative growth since 2010.
Business first, property second
While properties appreciate over time, the progression is gradual. If one aspires to accumulate wealth, starting a business should be the primary focus. Many affluent individuals are entrepreneurs first and investors in property second. They recognise that the real growth in wealth comes from their business endeavours and property investment serves as a supplementary asset.
Interestingly, during economic downturns and challenging times, opportunities in the property market can emerge. A period when people become hesitant to buy property is when favourable opportunities arise.
It is essential to embrace the property market even when times are tough. For instance, during economic downturns, some property owners may choose to sell their properties at lower prices, offering potential buyers advantageous deals. Many property investors can attest that there is no best time to buy property but there are always good deals to be found, especially during challenging times.
Additionally, property observers argue that older properties in the sub-sale market often offer better investment opportunities than new developments. These older properties can have more room for appreciation, particularly when new developments have a positive impact on the surrounding property values. However, this appreciation takes time and patience. It is essential to remember that, in the world of real estate, the future is not predestined but by a combination of factors that contribute to a well-rounded investment strategy.