Interested in 9 Best Places to live in Johor and want to invest in property? Real estate is often one of the most robust, low-risk and decent-return investments. However, Malaysia is currently facing unprecedented instability. Yes, we are talking about the recent coronavirus (COVID-19) outbreak. So, is now still a good time to invest in real estate?
Malaysian government measures
First, let’s take a look at what the Malaysian government has done to boost the economy in 2020. Since the start of the Movement Control Order (MCO) on March 18, 2020, the government has continuously introduced various measures to boost the market and provide financial assistance to the people.
For example, on March 20, 2020, Bank Negara Malaysia (BNM) announced that it would reduce the Statutory Reserve Requirement (SRR) from 3% to 2%. The SRR is a policy tool to manage the liquidity of funds, and by lowering the SRR, Bank Negara Malaysia’s move is expected to increase the availability of liquid assets on hand by RM30 billion.
While the liquidity of the domestic market has improved, the number of people applying for loans is still not large, so banks have been looking for low-risk lenders at this time, wanting to lend money.
Let’s start with a quick recap of how bank interest rates in Malaysia have changed in 2020:
Bank Negara cut overnight policy rate (OPR) four times in 2020 –
The first was on January 22, when the overnight policy rate was cut from 3% to 2.75%;
The second time was on March 5, when the rate was cut to 2.5%;
The third time was on May 5, when the interest rate fell to 2%;
The fourth was on July 7, when the overnight policy rate had reached a record low of 1.75%.
From this point of view, there is actually quite a lot of released cash flowing in the market, but should we venture into real estate investment? It is recommended to wait and see for now.
Is now a good time to invest in real estate?
Many investors should now be adjusting their portfolios for the upcoming risks. Those investors who can apply for a loan can now take advantage of the opportunity to acquire undervalued real estate.
1) Long-term investors with sound financial resources
First, you should look at your financial situation objectively and ask yourself: Are you capable of handling different contingencies (like a real estate price crash)? Do you have the ability to hold until the price recovers? Also, are you going to hold onto the property for the next 3, 5 or 10 years?
If you meet the above criteria, now is a good time for you to invest in Malaysian real estate!
At present, real estate developers are actively giving discounts to houses that cannot be sold to attract the attention of buyers. At the same time, property prices have also started to decline, and the interest rate environment has been quite favorable. As we just mentioned, the overnight interest rate policy has dropped for four consecutive times, and the current interest rate can be said to be at a very attractive level. Especially compared to the 8% to 9%, or even double-digit rates of the past, today’s interest rates are very, very low.
2) Investors who hold or speculate in real estate for a short period of time
Demand in the rental market and growth in real estate prices are slowing, so both types of investors are actually advised to stay away from real estate investment for now. The current market is better suited for rental. Landlords have a lot of options, able to obtain more leverage and leverage to hold down prices and negotiate.
In addition to this, the growth of domestic real estate prices has begun to peak, as banks start to tighten lending and the country’s economic development shows signs of maturity and stabilization. That being said, if you’re a short- to medium-term investor with great means and vision, the current environment is actually quite favorable for investors who are adopting a house flipping strategy.
Investors who understand speculative skills can buy high-quality real estate at a low price at this time, and then sell the real estate at a high price. But the risk in doing so is that they need to find buyers in a short period of time, otherwise they will be easily “burned”. Moreover, the current market sentiment is slightly pessimistic, so many investors with ample cash may still choose to bide their time.
What should you pay attention to when investing in real estate?
With the outbreak of covid-19 and the early recovery of the Malaysian economy, buyers and sellers should pay more attention to the Force Majeure Clause in legal contracts. Many contracts have force majeure clauses. Under this clause, in the event of an unexpected situation, such as the current global epidemic, both buyers and sellers can be exempt from any legal financial or legal obligations.
According to Malaysia’s National Property Information Centre (Napic), the properties which have demonstrated the most stable prices over the past 20 years are terrace houses located in the urban periphery. Also, to invest in real estate in today’s circumstances, you must do a thorough and detailed research to find out more secure types and locations of real estate.
Property investment is a long-term game and planning is the key. Watch more videos for a better decision!
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Malaysia investment information:
- Malaysia | Why you should Immigrant in Selangor
- Immigrate to Malaysia | Lower housing costs are the best choice for Hong Kong residents
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