There are three types of property market in Malaysia. The first is primary market. This is new launched developers’ projects. Second is subsale property which is secondary market. This is where you buy the property from existing owners. The third is auction property, which we vaguely referred as tertiary market.
If you followed me long enough, I have been advocating investing in subsale property. There are many reasons why I tend to invest in subsale properties. Here’s why:
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Cheaper
Subsale property in Malaysia is generally much cheaper than new projects in primary market apart from the upfront capital and other costs. Some subsale is still cheaper even if we were to include the down payment and other costs.
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Reliable Data
The information about subsale property can be easily obtained on the internet. Information like the rental, market value, occupancy rate, tenant mix are all available to you. Thus, there is no guessing work and reduce risk.
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Less Risk
The last thing we want when buying property is the project unable to complete on time. Subsale property is completed and therefore no risk for non-completion.
It is never a better time to buy property as PropertyGuru recently reported:
Malaysia’s property supply growth in the market spiked by 34.53 per cent year-on-year (YoY) and 11.94 per cent quarter-on-quarter (QoQ) in the second quarter of 2021 (Q2 2021), driven by more homeowners selling property for cash flow, according to PropertyGuru’s latest Malaysia Property Market Index (MPMI). The Star
More and more supply entered into the secondary market where people are cashing out for cashflow. This will lead to prices to drop.
Though subsale property is good to invest in many ways, but it is not easy these days.
Read my previous blog post: Malaysia Property Market 2021 Set For Year-End Bounce? A Bit Optimistic
Subale property don’t get the same incentive as developers projects such as the HOC (House Ownership Campaign). Not only property buyers need to fork out huge upfront down payment, they also need to come out with other cost e.g. stamp duty, legal fees etc.
When it comes to getting financing for a property, the bank will look at the projected return on investment and decide if they want to finance the property. The problem is that banks have become more conservative in their efforts to assess valuation. Buyers would need to have larger upfront capital in order to buy.
There are many reasons for the decline in subsale property. The government’s incentive for buying property focuses on primary market only. That is the problem, as subsale property accounted for 80% of the real estate industry in Malaysia.
To date, there is no sign of any support from the government to improve current situation and no light at the end of this tunnel for this struggling industry.
Banks are essential for property investment. If they reject a loan or refuse to lend at all, the buyer is likely to give up on the deal and move on. Without bank financing, property investment would not be as easy and accessible as it is today.
With the current situation, there is no indication that the property market will improve in 2021.
