‘LELONG HOUSES’ (AUCTION MARKET) DURING THE PANDEMIC

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The Department of Statistics Malaysia reported that the number of buyers who qualify for property loans has dropped because of the spike in unemployment this year. The number of homes expected to be listed for auction could see a surge next year if unemployment pushes more people to disqualify for loans. Long term unemployment may push more people to opt into selling their houses as they believe that liquidating their assets will help them more in the long run. The effect of rising unemployment has yet to be manifested in home loan defaults as the moratorium is still on going.

So far we have seen a few luxury properties in KL been put on the auction market that have been auctioned off for at least under 20% of their market value. According to Property Auction House Malaysia, more properties are expected to be listed on the auction market after the extended moratorium ends this year. Another factor that plays into the rise in listed luxury properties was the temporary suspension of the MM2H programme, as well as the travel restrictions on foreigners, which mean units on some properties are vacant thus putting a halt in income generations for owners to cover monthly obligations (i.e. maintenance charges and/or bank obligations).

“It is definitely not a good thing for the market when there is more supply. Some may see it as good for the auction business when there are more properties to be listed for auction but in fact, when the market is soft, buyers are limited so supply becomes more than demand hence pushing the prices of auction properties lower”, says Low from Property Auction House. 

ONLINE AUCTIONS

Since the COVID-19 outbreak, observing social distancing measures is the new normal. This is no different to the auctioneers who are now likely to rely more on virtual auctions. According to Property Auction House, they have already been utilising fully online auctions and have been conducting online auctions for various banks where the bidding is performed via mobile device.

“More people are starting to look at auction properties today. Auction properties were less popular previously due to poor perception and a lack of understanding”, Low says. Compared to five years ago, auction properties started gaining more attention when many auctioneers and agents started to organise seminar on the subject. “Also, now that many auction properties are brand-new condos with prices reduced up to 50% from their launch price, the auction market is getting more attractive”, he adds.

CONCLUSION

Now may be a good time to look for property to buy for a first time homebuyer, and could consider looking at some auction property market for better prices as some properties are being sold below their market value. As for cash-rich companies, this may be the best time to buy as there are more commercial property below market value compared to residential units in the auction market.