What do you need to consider when buying property during low OPR environment?
Many may wonder whether this is the right time to buy a property because property prices go down during this pandemic period. In addition to that, the loan rate has been reduced which make loans more affordable to take. However, OPR is reduced because of the slowing economy outlook, hence it is not as simple to just make the buying decision based on the reduced interest rate and reduced price. This article explains several points that you need to consider when buying property during this low OPR environment.
- Purpose of the property buying
There are 2 main reasons why people buy properties, i.e. for own stay or for investment. If you are looking to buy for own stay, now might be a good period to look for cheap property. In previous year, your ideal property was selling at a higher price, but now it no longer! Get what you want when it is cheap and now is the buyer market, you will have a better chance to negotiate even better price than the already low price.
If it is for investment, you need to do more market research before going in because the supply of the properties in the Malaysia market is more than the demand in general.
2. Type of property
At the moment, purchasing residential properties at selected area seem to be less risky compared to commercial properties. With the new trend of people working at home and profit loss during the lockdown period, many companies are closing down or downsizing while slowly changing their mode to work-from-home. Hence, the demand of commercial properties is lower. Purchasing a commercial property at the moment may mean lower rental or even no demand for your property.
Because there are many residential developments launched in the previous years, the oversupply of the residential properties is seen. However, according to Ifast research team (read more here), the property overhang for the lower end / affordable housings in Selangor area is lesser compared to other states and higher end units.
When you are choosing for the property investment, consider the type and location of the property. Make sure there is demand in your properties, else, you might suffer loss at the end with no demand or low rental.
3. Future income stream
When people think that it is now very affordable to take up a loan when the OPR is low. However, when the economy is recovering, BNM might increase the OPR rate several folds. Do consider the increase in OPR and check whether you can afford to pay the increased loan installment in the years to come. Make sure you have stable income stream(s) for the coming years before you make a huge commitment to buy a property.
You can always start from lower end residential property purchase with lower risk rather than purchasing a big unit during this period.
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