my philosophy in prop investment is simple. i always assume rental gain are people helping me with the installment. so therotically if property prices drop, it actually doesn't affect me. the only thing that does affect me is the rentability of the area.
and speaking about rent, during bad times, of course need to correct to market condition. and even if rental is less than installment, no big deal, at the most then i would top up the difference. let's say the unit installment is rm2k/mth. even if i lease it at rm1.2k/mth, i need to top up rm800/mth. not a big deal bcos the tenant already HELP to pay rm1.2k/mth. and eventually over a long period of time, the unit is mine. but of course, we obviously do not wish this to happen. of course the biggest concern is not getting any installment at all from rental income but this is unlikely as if you have selected a unit in a fairly decent location and when you start to leasing it cheaper than market value, am sure you will definitely manage to secure tenant. remember, beggars can't be choosers when bad time comes.
and back to property up versus down topic. for those who bought approximately 3 years ago or earlier, they are virtually safe by the amount of appreciation that has occurred. so in terms of both rental and market value, these property are virtually save from any depreciation even if there's a drop of say 30% from current pricing. so it should not affect them at all again. and again, if someone who can come up with a statistic on property already fully paid off, am sure the numbers would be staggering. so we are talking about millions of property which are debt free to a whole lot of people.
when you strike off all those in the above list, how many property do you think is vulnerable to a property correction?
even MK for example, with the average gain of more than 10% per annum previously, do you think the owner who have previously enjoyed such handsome gains are worrying about the current dip there or the decrease in rental? the only person trap will be those entering at a much higher price recently. and when the property does depreciate, no prizes for guessing who will be buying off from them at discounted prices, it's gonna be the previous owners.
anyway, that's just my views.
and lastly, i always reserve 1 full year of full installment in my account for all my properties. and i usually use interest rates @ 8% as calculation for monthly installment. so give or take, i still have a cushion of blr to move until 10.5% before i gets 'stuck'..... theorectically.
be safe man!