By Propedia Consultancy founder Sr Vicky How
Sr Vicky How
Bank Negara Malaysia’s move to increase the interest rate by 25 basis point to 3.25% may affect property owners and investors who previously bought properties en bloc under the Developer Interest Bearing Scheme (DIBS).
Now that the properties purchased under the DIBS scheme are completed and due for vacant possession, many property investors will be facing difficulties to service the higher loan installments.
In the event of default by the property investors and owners, this would lead to multiple properties in the same area or scheme being auctioned off at the same time. The aforementioned scenario begets the question whether the multiple foreclosures would affect the property value of other properties in the same area.
The answer is YES.
Let’s go back to the basics. A valuer determines the value of a property based on past transacted price. Properties transacted through an auction in the high court, the land office and/or private auctioneer are still transactions that will be reported to the Jabatan Penilaian dan Perkhidmatan Harta (JPPH).
A valuer is required to analyse the most recent transacted price from JPPH and make the necessary adjustment to the value of the property. If there are too many properties from the same area or scheme which are transacted at low purchase prices, it will affect the valuers’ decisions for subsequent transactions.
The valuer will also factor in the demand and occupancy rate in the area as well as the risk factor that other properties in the same area or scheme will be auctioned off.
Given the above, it may be wiser to buy in areas or scheme where the occupancy rate and/or demand is high. Even if the property units are bought for investment purposes, as long as the property units are occupied by tenants, the risk of owners/investors defaulting leading to the property being auctioned off will be less.
About the contributors
Sr. Vicky How is the Founder and Principal of Propedia Consultancy. Propedia Consultancy is a property consultant company which offer services such as sales and lease of property, property management, and valuation. In addition, she is also an invited guest speaker for special events and has been a trainer for Real Estate Agencies and also a coach.
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