Malaysia property auctions take on a new lease of life

THE idea of an auction seems to be the creation of a market for goods that would otherwise not exist. For instance, antiques and second hand merchandise are rare goods that would be difficult to obtain without going through an auction.

In light of recent economic hardship, another segment appears to have entered the auction market in a relatively big way and that is property.

Property auctions are far from new, but they have taken on a new lease of life in the west since the credit crunch.

The Daily Telegraph reported that only 15,000 properties changed hands in the United Kingdom at auctions in 1998, but by 2007 the figure had more than doubled. This was just before the financial crisis hit its peak, when 45,000 repossessed homes flooded the UK property auction market in 2008.

Back home in Malaysia, acquiring properties through auctions seems to have become popular as well.

However, although the number of purchases have risen in recent years, Ehsan Auctioneers Sdn Bhd sales manager Mohd Ali Abdul Majis argues that this increase, unlike the trend in the west, is not related to the credit crunch.

“We have recorded a steady rise in the number of auction purchases in recent years. Business started picking up in 2007, and although there is an indirect link between the credit crunch and this increase, I would say that public awareness was the most important factor,” he says.

He cites the ease at which people can get details of auctions via the Internet as a major contribution to this awareness.

“As a result, investors nowadays are more willing to invest in different ways if it benefits them. It seems that they have associated good opportunities with property auctions,” he adds.

Good opportunities indeed. Most properties are auctioned off at 20% below their market value, with a reserve price of up to 50% below its market value, in some cases.

It is not difficult to take part in a property auction – all that is needed is a bank draft of between 5% - 10% (depending on the property and auctioneer) of the reserve price, as well as the ability to pay the difference of amount in cash if the final auction price moves up. This, in addition to being over the age of 18 and having an identity card, and you are ready to take part in the bidding process.