Not a great time for house flippers

Property investors must be able to hold their assets for at least 10 years for the value to appreciate, says consultant


Despite the current “winter season” in the property market, which is supposed to provide a wealth of opportunities for real estate investors, it may not be the case for house flippers.

Boutique consulting firm FAR Capital Sdn Bhd founder and CEO Faizul Ridzuan said given the current situation, it is not the right time for investors who wish to flip their properties.

“It is a horrible time for short-term investors who want to flip the properties they bought five years ago. We’ve just changed the government and there are a number of uncertainties in the market.

“This means people don’t really want to commit to a RM500,000 or RM1 million property. It is not about being confident or not. People are adopting a wait-and-see approach in buying expensive homes,” he told The Malaysian Reserve.

Faizul added that Malaysia is expected to experience a slower growth this year, which would also translate into a slower growth of property prices and wages.

“That’s just how the economy works. In terms of the property market, it is not about being in a bad or good situation. It is a cycle. And the cycle that we are in right now is winter,” he said.

Malaysia’s economy grew 4.5% in the second quarter of 2018 (2Q18), lower than the estimates of around 4.9%.

Bank Negara Malaysia governor Datuk Nor Shamsiah Mohd Yunus said the slower growth was due to commodity-specific shocks in the mining and agriculture sectors, while the services and manufacturing sectors remained key drivers of the economy.

The mining sector was mainly affected by declining natural gas production due to supply outages in East Malaysia, while the agriculture sector was hit by weak crude palm oil production impacted by supply constraints and adverse weather conditions.

Headline inflation declined to 1.3% in the April-June period from 1.8% in 1Q18, largely due to the zero-rated Goods and Services Tax, but higher transport costs added pressure to the prices of goods.

The central bank has lowered the country’s growth projection for the whole year to 5% from its previous projection of between 5.5% and 6%, on anticipation for prolonged disruptions in oil and gas production and low production in agriculture.

Going forward, the central bank expects growth momentum to be supported by sustained global growth, while global trade momentum will support trade activity.

Meanwhile, Faizul opined that property investors must be able to hold their assets for at least 10 years for the value to appreciate.

“Our view is that if you want to buy a property, you must be willing to hold it for at least 10 years. Anything lower than that, you might end up selling it at a wrong price and time.

“After 10 years, it would be impossible for you to get the property with the same price when you purchased it,” he added.