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Waiting for the right price |
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Are you gifted with futuristic visions like Nostradamus? IF not, then it may be hard for you to accurately predict when the best time to buy is. Let’s look at two scenarios: Property Boom A property boom is a progressive stage when properties are selling very well, which, can be due to one or a couple of things like a nationwide increase in income, actual demand for new families and retirees, actual demand for foreign investments, low interest rates, low inflation rates, cheap raw materials, strong Philippine currency against the dollar, and etc. These signs give many potential property buyers a positive outlook and this is when many experienced property investors buy even though prices are at the highest. This is because times like these offer the buyer an array of property options from different sources supplemented by banks that are giving fantastic home deals with low interest rates to buyers. This period gives many buyers an opportunity to buy several properties or perhaps even a larger investment at actual lower costs than it would usually entail when you buy during an era of low prices but very high interest rates. Property Doom A property doom is a declining stage when properties are selling at a slower pace, which, can be due to one or a couple of things like a nationwide decrease in income, no new demand for new families and retirees, no new demand for foreign investments, high interest rates, high inflation rates, increasing prices of raw materials, weakening Philippine currency against the dollar, and etc. These signs give many highly liquid property buyers a positive outlook and this is when many experienced land bankers buy at very low prices in cold cash. This is a period that is perfect for cash buyers who can set aside a larger amount of cash for a longer term investment in preparation for the next “Property Boom”. Most of the property buyers during this period are typically characterized as “highly liquid” to be able to buy good deals at low prices in cash. Cash is the common currency during this period as interest rates for bank loans are very high amidst an atmosphere of inflation and economic uncertainty. In times when it’s important to be liquid in cash, it becomes hard for the average buyer to get himself the good deal he envisioned when he does not have the cold cash to pay for it. Buying a bargain property during this period through a bank loan with high interest rates may just cost as much as buying a property during a Property Boom with low interest rates. Because the actual cost of buying a property may just be the same during Property Booms and Property Dooms, it is best to buy the property when the right one comes along regardless of the market condition. To simplify things, if you need to buy a property through a bank loan, then buy a property during a Property Boom to take advantage of low interest rates. If you can afford to buy a property in cold cash, then buy a property during a Property Doom to take advantage of low prices. The only time when interest rates are low and properties are low is the transitional period after the Property Boom ends and right before the Property Doom begins – in many cases, this is just a very short window of a few months and the low interest mortgage is temporarily given for the first year, the succeeding years will see an uprise of interest rates and monthly payments. Even at this point, property prices and interest rates are not at their lowest – but lower than usual. You have to be a world renowned economist like Alan Greenspan to spot this short window, and even if you do, your actual savings may just be the first year of low interest payments which may be negligible for many buyers over a longer period of time. |
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