Wednesday, 30 March 2011

Property Ponderings (3)

I have previously mentioned the issue of the somewhat alarming recent prices rises for property in Penang and there is a useful thread on the MM2H Forum (Penang Condos) where this issue is being discussed. Some of the potential explanations for the price rises are offered together with a slightly cynical (though I suspect not far from accurate) theory as to the marketing strategy of the developers in shifting their properties. Right or wrong, property prices continue to rise!!! Have a look through the various sub-boards on that site (e.g. "Where to Live" & "Property Matters") and you will find several discussions about properties in Penang (and elsewhere) with references to upward price trends.

In short, it seems that many of the properties in Penang have gone up by as much as 10-15% in the last 3 months alone and by an even more alarming amount in the last 6-12 months. Question is why? While it is hard to be sure it doesn't seem that there would be enough buyers there to snap these properties up and continue to drive up prices, especially in terms of MM2H applicants, so on face value it seems to be similar what went on in Dubai with property speculators buying blocks of property off-plan hoping to 'flip' them (sell them on prior to completion at a very healthy profit). Many individuals, often in syndicates, also got caught up in this "Can't Fail" investment opportunity and handed over money in bucket loads. It was fine at first (many investors seeing a 50% profit on their investments within 6 months), then of course, it failed. World economy, no buyers, high and dry investors. Many of the properties in Dubai remain unfinished and those that got completed, investors are having a hard time in dropping them for 30% of what they paid for them. I'm also aware of similar issues in Florida with properties that were going for $350K two years ago no going for $160K!!

Question is will the same happen in Penang and if so when? Is the current upwards trend sustainable? No-one wants to buy when property is at its peak, even if it's with a view to living in the place rather than selling as an investment because at some stage, you are likely going to have to move on (as the word 'Second' in the title of the MM2H visa implies). Few would wish to sell at a 50% loss. Problem of course is how long do you wait, if you wait at all? Next year they could be 50% higher again. It's a tough call.

To get the most bang for the buck I am seriously considering off-plan purchase, subject of course to being able to find the right one in the right place and built by the right developer. Again, as has been mentioned before, it's a bit more of a gamble as you cannot see what you are getting and walk away as you can with an existing build. From what I gather, developers are being given a bit of an incentive to build properties at or under the RM 350K mark so time will tell if that generates more builds in that area instead of the "super-condos" that seem to be springing up. A useful site to check out availability of property for sale (existing and new projects) which I was pointed towards is Fullhouse.com. The site also caters for rentals. I have added this site to the 'Useful Links' also.


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