There’s never been a better time to dive into the property market, with national initiatives such as Bank Simpanan Nasional’s Youth Housing Scheme, financing platforms like rent-to-own and tools like PropertyGuru Loan Pre-Approval making barriers to entry lower than ever for purchasers.
But if it’s your first time buying a property, especially for investment, the numerous options available can be confusing. Where should you start?
Well, there are a few tell-tale signs you can use to determine if a property is worth the buy, namely by comparing it against recently sold and unsold properties, reviewing rental prospects, following the 1% rule as well as noting the future prospects of a neighbourhood.
When it comes to buying property in Malaysia and snagging a great deal, it isn’t just about getting the lowest price possible. There are other considerations such as appreciation potential which could be a factor. Experts claim that it will take at least five years to enjoy significant capital gains from a property investment. Perhaps even a shorter amount of time for established areas.
So, without further ado, here’s a list of useful tips from PropertyGuru that will help you tell whether you’re getting a good property bargain or not!
1) Compare Against Recently Sold Properties
When buying property in Malaysia, comparing a potential purchase to recently sold properties is one way to gauge whether the selling price is reasonable.
Note that the properties should, however, be comparable in terms of their size, condition, and location. Your real estate agent should also have a list of recently transacted properties at his or her disposal, so don’t be afraid to ask.
If you find out that a property is being sold to you at a much lower price, you may want to dig a little deeper. Is the property being sold at a lower price due to its old age? Are there defects in the home that you’re unaware of?
2) Compare Against Still Unsold Properties
When buying a property in Malaysia, you want your real estate agent to offer you the best price (note that again, we didn’t say “lowest”).
If you suspect that the property is overpriced, take a look at other comparable properties that are still currently on the market. A high number of vacant properties in the vicinity might be an indication that the neighbourhood is unsavoury, or has low demand.
Armed with this knowledge, you’ll have a clearer picture of whether the property investment will be worthy or not.
3) Review Rental Prospects
If you’re buying with an eye to rental income, then you should take note of PropertyGuru’s advice to check rental rates for similar units in the project or area to estimate potential returns on your purchase.
Keep in mind that factors such as furnishings, unit size and nearby amenities will have a large effect on maximum and minimum rentals.
In addition, strive to find quality tenants who will keep your property in good shape while paying rent in a timely manner. It’s every landlord’s nightmare to have a tenant leave them with repair bills higher than their total rent payment!
4) The 1% Rule
Following from the previous tip, many homebuyers have used the 1% rule to assess a property’s profitability. The rule of thumb is that the property should generate at least 1% of the property’s selling price every month.
Say you’ve recently invested in a piece of real estate that costs RM2,400,000. If you apply the 1% formula, the property should ideally produce RM24,000 for you. This money that rolls in on a monthly basis serves as your rental income that goes towards covering all of your other expenses.
If you’re looking at buying a property in Malaysia that’s able to generate 1% every month (or even higher!), then the property might be a good deal.
5) The Future Prospects Of A Neighbourhood
The value of property depreciates with time, and nobody wants a property that loses its value over a short time span. But, (and this is the crucial question) how do you know if the property you buy now will still be valuable many years later?
Keeping yourself informed with the latest property news is one method that’s proven to be helpful. For example, you might learn that certain areas in Malaysia are, or will soon be, undergoing urbanisation and redevelopment. This means that properties in the area could see a rise in value over subsequent years.
If you aren’t sure which locations to start looking at, here are some notable neighbourhoods in Malaysia that you could consider:
Located on the outskirts of Kuala Lumpur, Bangsar is an affluent neighbourhood about five kilometres away from KLCC.
Many homebuyers are eyeing houses there because of Bangsar’s great location, and also its plentiful amenities. Within the same area, you can find food places, shopping malls, schools, a sports complex, and even a hospital.
Araville, Bangsar Peak, and Inara are just some of the high-end condominiums found along Bangsar Hill.
According to Savills’ data, houses in Bangsar appreciated between 2010 and 2017 by a staggering 239%!
Puchong is in a central area of Klang Valley, and has entertainment places such as IOI City Mall, KL Sports City, and Pavilion Bukit Jalil. These developments aside, the neighbourhood is highly accessible by a well-connected road system.
Due to such factors, the working population from other states have been flocking to Puchong. Some of the most established residential areas include Taman Kinrara, Bandar Kinrara, and Puchong Perdana.
Between 2011 and 2017, properties here enjoyed an all-time-high appreciation of 242%.
Cheras is one of the biggest, oldest, and more well-established residential areas in Klang Valley.
Thanks to a few commercial developments in the neighbourhood, residential real estate there has been enjoying a high return on investment. Notably, the EkoCheras integrated development is one development that’s likely to further drive the growth of property prices in areas near to it.
Now, if we were to analyse PropertyGuru data up to January 2019, it shows that the local market in Cheras has been broadly buoyant over recent years.
The average property prices in the area demonstrated a compound annual growth rate of 8%, with the median price across more than 52,000 properties sold in Cheras in 2017 stood at RM655,000. That figure is less than half the median which was recorded in Kuala Lumpur of RM1.47 million in 2018!
So, it just goes to show that this well-established neighbourhood, with all its matured amenities and ease of access (highways and public transportation), fuels its popularity with homebuyers.