March 23, 2017

Buying For Own Stay

According to a recent chinese article with reference to Property Guru, the Top 6 considerations when purchasing a house are:

  1. Location
  2. Security/safety concern
  3. Unit sqft size
  4. Amenities nearby and facilities
  5. Developer's profile and track record
  6. Neighbourhood potential growth

This result is slightly different from what we had in year 2016 where the top 2 considerations were location & per square foot (PSF) price. From this, we are able to conclude that location itself plays a major role when it comes to property purchase, be it for own stay or investment, which is then co-related to criteria #4. Over the past few years, we had encountered several bungalow or semi-d owners who shifted from landed to high-rise condominium. They are certainly not downgrading themselves due to financial problem, but they are more concern on the safety and security matters. This is significant if they are not staying in a gated-guarded landed community. Another reason is also because their children have grown up and each of them is having his own family and house. Thus the old parents would like to shift to a smaller unit for the ease of daily household chores.

Property prices in Kuala Lumpur and Selangor have been increasing for the past many years and it is still going up. We are sure that many of you have heard the "rumours" saying that the property prices will come down. Be it true or not, no one can assure what will happen in the future. One has to do his own due diligence for whatever action he is taking. However, studies show that the property is not over supply, but it is somehow undersupply for the right products. You have to get the right product, be it for own stay or investment. Then, you would be quite safe.

We notice that many home buyers especially the younger generations or the Gen-Y are facing the problem of not able to secure their own house even after working for few years. This is not uncommon when the property price keeps rising. Imagine a fresh grad making a RM2,500 to RM3,200 per month in Klang Valley, how long does he take in order for him to have enough savings for the 10% downpayment of an average RM500,000 property. On top of this, you have to prepare an additional of about 5% for the legal fees. By the time you have enough savings for it (we assume 3-5 years later), what will be the price of that RM500,000 property that you have initially dreamt of? Has the price gone up yet? IT IS DEFINITELY A YES! 

Looking back to year 2011-2013, with around RM500,000, you could own a pretty good condominium with a size of about 1,000sqft in a decent location. Over the years, you notice that with the same amount of RM500,000, you either got a smaller size or you move further away from the city. That's the ugly truth and the only thing you could opt for if you can only afford a RM500,000 budget. Developer has no other option but to shrink the unit size smaller to 800sqft (or even smaller, 600sqft) in order to maintain the absolute price at RM500,000.

On the other hand, home buyer could also choose to stay in a place where it is slightly further away from the developed city or town area, if they required the same 1,000sqft. It is just a matter of give and take. We don't see this as a serious issue because many infrastructures had improved over the past several years and our government is still upgrading them from time to time. Highways have shorten the travelling time between two places. The best is that we have MRT1, MRT2, LRT1, LRT2, LRT3 and more are in the pipeline of greater KL transformation.

Therefore, how could the home owners solve the downpayment issue mentioned above? There are basically two options you can choose:

  1. Buy a new launch project which offers rebates and discounts for early-bird buyers
  2. Get a below market value subsale property

In this discussion, we will only focus on the option 1 as this is a straight forward scenario. Option 2 is a more complicated alternative and you need more effort working on it. Get in touch with us if you want to know more on this.

In today's market outlook, developers (but not all) tend to provide a decent amount of rebates or discount % for a limited time or to a limited number of early-bird buyers, which could probably getting yourself a ZERO downpayment kind of thing. For example, if a particular developer is giving an upfront rebates of 8%, buyer is able to secure a loan of 90% margin, buyer only needs to pay a 2% downpayment instead of the usual 10% scenario. On top of that, some developers also help to absorb the costly legal fees and stamp duty for these early-bird buyers too. Are these enough to solve most of your problems? 

Early-bird can always enjoy the great deals. Developers have gone to the extend of providing partially furnished package which could save you tonnes of money when they handover the key to you. The furnishings could possibly include but not limited to kitchen cabinet, hood and hob, oven or microwave, washer cum dryer, air-condition, water heater system, bedroom wardrobes etc... Therefore, instead of the very beginning scenario where you need a total of approximately RM75,000 cash out in order to own a RM500,000 property, you are only required to fork out about less than RM20,000 to own your dream house for the same price tag property now. Wouldn't this be the greatest thing on earth?