Without even considering HOW to buy into a booming real estate market, many people question whether it is a wise decision to buy into a property boom at all - and this is a fair reaction...
It is also a question which is highly relevant to the current Cambodian property market, as land prices skyrocket in urban hubs such as Phnom Penh and central Siem Reap.
To answer whether or not you should buy into a property boom - there is no perfect answer for every potential investor - as whether you should, or should not, buy during a property boom will depend almost entirely on your unique circumstances. Each type of property buyer has a unique set of considerations before deciding whether to buy during a property boom.
With that in mind, Realestate.com.kh wants to advise each type of property buyer respectively:
The "First Home" Buyer; should you buy during a property boom?
First home buyers are generally the most price sensitive type of buyer, because they may not have any equity (current properties) to use for a mortgage on their next property investment. Therefore, they are usually dependent on only their deposit savings to buy a new property. For this type of buyer, deciding whether to ride a property boom, comes down to only buying when you can actually afford to. First time home buyers have likely delayed their purchase, hoping that the market is going to adjust - downwards. However, unfortunately, in a property boom, delaying a purchase on a rising market often only costs the first home buyer more in the long run - as the average property prices don't stop growing. Keep in mind that property investment is for the long-term, even in a property boom, so the most important thing is to save hard for a larger deposit and avoid mortgage commitments, if possible. Then, aim to buy a property in a good position where you can add value over time.
A "Change of Scenery" Buyer; should you buy during a property boom?
In general - most people moving, will move to another property in their local area. However, many people look to escape the congestion of urban areas as they begin to grow up - in search of a quieter life on the outskirts of the city, suburbs, by the beach, near a forest or on a farm. Making a successful lifestyle-change property purchase will depend on how familiar you are with that new market, as well as the state of the property market in which you are selling your current property. Strong selling conditions in central Phnom Penh, for example, the extremely well-valued Chamkarmon district, mean it’s the perfect time to sell for those considering a lifestyle change property - and wanting to move to a location outside the central city: for example, trade in your high-valued villa property in BKK1, for a Borey home along Chea Sophara Road. Usually, prices are lower in areas outside the city, so selling in the city and moving to the country right now, during the property boom, means your purchasing power will be maximized. You should be able to get a bigger and better property with more privacy, and be near mortgage free - because you current home's sale should cover purchase fees. No mortgage would also improve your lifestyle, remember, but you might be trading this pressure for a slightly longer commute to work...
The "Down-Sizing" Buyer; should you buy during a property boom?
The down sizer, those people looking for a smaller, cheaper home, is often in the best position to buy their next home during a property boom. The chief example of a down-sizer is the retiree. Like an property up-grader, they tend to be selling at the same time as they are buying. However, the down-sizer is lucky that their new home tends to be worth less than the one they are selling. Strong demand will assist this type of property buyer, such as that present during a property boom - because it means a maximum sale price is available. With property boom conditions helping to assure a strong result, retirees and other down-sizers are more likely to be in a position to put some money in the bank and buy a less expensive retirement property.
The "Property Investor"; should you buy during a property boom?
Every property investors needs to ensure the money-return is sufficient before taking the plunge into even a property boom market. In a rapidly rising market such as Cambodia, that means keeping a strong head and not getting caught up in the boom fever. One of the main factors influencing your decision of whether to buy in a booming market, as a property investor, will be whether you will also be selling in a booming market, since capitalizing on demand for your existing property will boost the cash you have available to fund your next purchase. Consider your circumstances seriously before stepping into even a booming market - and consult a financial adviser to help make the right decision.