In the early days, when a property was to be “sold” this way, the bank would make it public by taking out a small, slim black-and-white advertisement that one would miss if one did not scour the classifieds. These ads were few and far between, whether it was for a shop or a house.
Things began to change several years ago after the 1997/98 Asian financial crisis. We started to see apartments advertised with black-and-white pictures the size of postage stamps with the necessary details for potential bidders to make a decision.
Many of these were located in what property professionals call secondary locations. They were neither properties – nor locations – the normal housebuyer would consider buying. Many of them had reserve prices of RM20,000 or less for an apartment. Those who had cash to spare bought them as a 20-year investment.
Now, there seems to be another wave of change. The last year or so, some of the properties that have come under the hammer are pretty attractive propositions, both in terms of the properties themselves and their locations.
There are pages of them shouting for attention, and often, colourful postage-sized pictures accompany the details.
Some of them are located in areas that many would consider desirable like SS2, Mont’ Kiara, Puchong, Klang, Ampang, Petaling Jaya and Damansara Perdana. Most of them are in the Klang Valley, although there are properties from Perak and Johor as well.
Quite a number of them are landed houses and some are bungalows. No longer are auctioned properties some little 600 sq ft unit in a block of low cost walk-up apartments. The fact that property agents themselves are buying into them speaks for themselves – that these are worthwhile buys.
What is happening? Nobody buys a house without really thinking it through and making it a long-term commitment. A property ends up under the hammer because the owner has failed to pay mortgage payments for several months. Legal proceedings begin after the bank fails to receive instalments for three consecutive months.
For the low-cost units, it is very likely many of the owners were forced into loan defaults when they were out of a job. They were probably blue-collar workers affected by the economic downturn.
But what about properties that cost RM500,000 or more? It is very likely these professionals lost their jobs too and when their savings ran out, they were unable to meet their mortgage responsibilities. It could also be due to their inability to cope with excessive loans.
In cases where the house is occupied by the owner and he is unable to meet mortgage payments, there may be a need for banks to consider restructuring the loan. There was quite a bit of that in the aftermath of the 1997/98 financial crisis.
Helping owners keep a roof over their heads will create a lot of goodwill for both sides. Putting properties on auction seems to be an easy way out and will not help property owners. With today’s escalating house prices, there must be some form of mechanism to promote home ownership.
Property auctions have become so popular today that it has become a fast-growing industry. There are websites, agents and a growing coterie of licensed auctioneers. It may not be long before banks devote officers just to look after the auction market.
There are even courses dedicated to serving those who want to buy such properties and who don’t know how to go about it.
The fact that the fees are slowly increasing from RM300 to just under RM1,000 is an indication that there are takers who are interested enough to pay to learn about the auction market.
One may wonder, why does one need to invest in a course to invest in property? Simply because there may be complications when buying property via auctions. When one buys such a property, one buys “as is where is”. That means one gets the property as it is.
One cannot go in to check the place, knock on the walls or check for termites. The outside may look decent enough, but the inside may be a different story.
There may be tenants who refuse to leave. Or an overgrowth of foliage in the hall of an apartment due to open windows and balcony doors. Or, as in one case, a dead body in a refrigerator. In the case of condominiums, there may be unpaid maintenance bills that run up to tens of thousands of ringgit.
An often-quoted economist said several months ago that he expects high-end properties to come under the hammer. Maybe that day has arrived.
Assistant news editor Thean Lee Cheng is all for property investment, but the way the auction market is growing shows that there are major imbalances in home ownership.
By The Star (by Thean Lee Cheng)
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