7 things to do while awaiting a property bubble burst

Many laugh at the possibility of the property bubble bursting, especially those who earn their living from the real estate industry.

Others are confident that when the property bubble bursts, they will enter the property market and buy all the properties at fire-sale prices.

Whichever group you belong to doesn’t matter. These are seven things you can do while waiting for the property bubble to burst.

1. Identify the signs and always keep yourself updated. It’s not that wise listening to both those who say there is no possibility of a property bubble burst or those who predict it will happen.

Read here for the signs of a property bubble burst. Remember, if another world financial crisis occurs, Malaysia will not escape unscathed.

2. Check out property prices. There are already overpriced properties in the market. That’s why its prices have already dropped even without a property bubble bursting.

However, there are also properties in a mature neighbourhood, owned by owners who bought many years back.

Whether a property bubble bursts or not, these owners do not usually sell at 20-30% lower unless they themselves are in financial trouble.

This means that certain choices may still NOT be available even when the property bubble bursts.

3. Read, read and read. By the way, when a property bubble bursts, it’s not just property prices that will drop. Many other potential investments will also open up too.

First up may be the stocks of developers. Usually the whole stock market will drop first before the property market crashes. It’s quite unusual for property market bubble to burst first while the stock market is okay.

4. Do your research. Drive around the areas you believe are attractive to buy into or for own stay. Buy nearer or buy further? Buy more facilities or buy more space? That’s usually a choice of “cheaper” due to the property bubble bursting or “much cheaper” when it’s further away.

5. Identify the type of properties you like to buy. A high-rise property for positive rental yields? Landed homes for own stay? Both will provide capital appreciation.

There are so many choices today that you may still miss out because when property prices suddenly drop, many people will also be entering the market too.

6. Save as much as you can. When property prices suddenly “jump down the building”, cash becomes king. So, assuming a RM500,000 property becomes RM400,000 suddenly, one would need RM40,000 as downpayment.

7. Keep hoping the government can ensure the property market is orderly. And that there is no property bubble burst in the near future. At the moment, both Bank Negara Malaysia and the government are doing okay with their cooling measures and affordable homes plan respectively.

If you chance upon undervalued property in upcoming auctions, it’s worth some serious action, especially when you look at the price, compare it to the median transacted prices in brickz.my and realise that it’s already 30% below the prices of all previous transactions.

This article first appeared in kopiandproperty.com

Charles Tan blogs at property investment site kopiandproperty. He dislikes property speculators and disagrees that renting is better than buying. He thinks it’s either property or poverty. He is presently the CEO of an auction house auctioning assets beyond just properties. -FMT