According to an HSBC survey, 35% of Malaysian millennials already own property. Of the remaining 65%, 94% are keen on purchasing a home in the next five years.
Despite the global rhetoric of millennials seeking to rent homes as opposed to outright owning them, the survey implies that buying and living in your own property remains a key cornerstone of Malaysian culture.
However, in another survey also conducted by HSBC, it mentions that house affordability remains a key obstacle and barrier of entry for millenials looking to buy a property.
That’s why now is a great time for millenials who are actively looking to purchase property.
4 Reasons Why You Should Invest in Property During COVID-19
1. Lower Interest Rate
Most economies around the world adopt the Keynesian school of thought in economics.They use active government policies to manage aggregate demand in order to address or prevent economic recessions.
One of such policies includes lowering the interest rate, which has a multitude of effects on the financial market and the economy. For the common investor, lowering the interest rates translates to lower Fixed Deposit Rates, which makes savings less lucrative> It also pushes investors to free up their capital to invest in other instruments that provide higher returns than bank savings, such as stocks, bonds, and even property.
Another effect of a lowered interest rate is that lending becomes way cheaper. It would be very lucrative to take on a mortgage loan, as you would not incur as much interest, making it an easy way to own property.
And the lowering of interest rates will usually only happen in market downturns, where liquid capital is vital in a bull market. Also, when property prices are on the rise, central banks are much more inclined to increase their interest rate to keep inflation in check, and to beef up the federal reserve.
2. Bankers are much more lenient
One other result of a lowered interest rate, is that banks are losing profits from their net interest margins. Meaning that they are not gaining as much profits from their loans.
While this may be speculative in nature, and different banks have different policies to tackle a pending recession, banks are much more inclined to offer mortgage loans in times of crises in order to pad their loan books and earn more profits.
While they may or may not loosen their application criteria to attract more applicants in exchange for more risks, it is hard to deny that banks will take a much more active role in securing more loans in order to achieve their key performance indexes.
With more homebuyers withdrawing their loan applications in fear of a recession, a property investor would have a better experience applying for loans during a market downturn.
3. Better leverage for subsale properties
Speaking of homebuyers fearing a recession, the same holds true for property sellers as well. There is a common adage that “cash is king” when markets are down, and many property sellers are incentivised to sell off their property as soon as possible in a recession to lock in their profits.
Many property owners may choose to sell off their properties for a multitude of other reasons as well, such as a lack of job security, or a family member in need of emergency medical funds in a health pandemic such as the current COVID-19 crisis.
But regardless of the reasons, property investors can leverage this opportunity to negotiate for a better deal. When sellers are desperate for cash, that would be the best time for property buyers to sweep in to grab a property on the cheap.
However, this also boils down to your negotiation skills and your rapport with the property seller. So this is but one leverage amongst many that you can use to grab a good deal during a market downturn.
4. Price rebound
When purchasing a property when house prices are constantly on the rise, you might risk buying a property that is overvalued. How much of a profit margin would you expect to receive if you were to purchase a property in such a landscape?
On the contrary, purchasing an undervalued property during a market downturn, you would have plenty of upside potential. While not every property is a definitely good value if you were to purchase it during a downturn, there is no denying that it does unlock more buying opportunities for you.
All markets are cyclical in nature and property prices will rise and fall in different stages within the cycle. Being in an economic crisis yourself, it is easy to lose sight that the markets will rebound sometime in the future, and markets will always be doom and gloom.
Just like a famous quote from the billionaire investor Warren Buffet, “Be fearful when others are greedy, and be greedy when others are fearful.”
For many seasoned property investors, there are always two schools of thoughts when investing in a recession. To quickly liquidate your property and purchase a new one at the bottom of the market to maximise earning potential, or to hold onto your property for dear life knowing that a property is a long term investment.
Both are viable, with the former requiring a great degree of analytical skill and greater risk appetite. On the other hand, the former requires a high degree of patience and financial literacy. But regardless, buying a property during a market downturn poses a once in a decade opportunity for those who aspire to go down the path of being a property investor.
Are you looking to purchase a property during this COVID-19 downturn? Why not check out our property listings!
Here we cater to both subsale and newly developed properties, featuring no duplicate listings, to give you a seamless experience!
Our extensive team of agents and professionals will guide you at every step of your property journey.