When everyone is buying, don't buy! When people are selling, it's time to go shopping!
That statement I told myself is proving itself loud and clear. In the 2nd half of 2007, property prices sky-rocketed and many investors rushed in and some made a tidy profit. The unsavvy investors (followers) joined the fun, hoping to make a tidy profit as well. They bite more than they could chew.
The property market experienced a boom, from July to December 2007, was partly caused by the prolonged recession and economy setback between 1998 to 2004. During this period, property prices plunge. Post 2004, the economy started to recover and investors started their buying spree, causing the property market to recover and saw an exponental growth.
Some novice investors tried their hands and purchased more than their finances could afford. They could have experienced one promising return, and bought a lot more than they can truly afford. For example, their financial ratings may allow them to buy (with loan) one property, but some of these investors bought 3 or more units.
They purchase properties on Deferred Payment Scheme, where they placed a 20% deposit and hoping to sell the property before the Temporary Occupation Permit (TOP) is issued. With the sudden turn of stock market (bear market), which coincide with the TOP period, many of these investors are stuck with their property. Facing a TOP, they will be forced to sell their property or face potential bankrupcy, as they are unable to funish the balance 80% of the property price.
These investors will be forced to sell/dump their purchase, loosing their initial 20% downpayment or more. With more sellers and little buyers, property owners will end up having to sell at a very low price.
Time to look out. The worst is not over.
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