Are you buying your first property? Is it for your own stay or as an investment?
There are plenty of questions you might have when it comes to buying your first home. Don't always look for the lowest value property as it will only disappoint you later on.
To help you get started, there are a few tell-tale signs you could use to determine if the property is worth the buy. You can compare it against recently sold and unsold properties, study the rental prospects and the future of the neighbourhood, as well as follow the 1% rule.
You may also need to do some research as to how much the property has appreciated in value in the last three to five years and what are the future prospects.
Experts claim that it will take at least five years to enjoy significant capital gains from a property investment.
PropertyGuru Malaysia has shared some useful tips that will help you tell whether you’re getting a good property bargain or not!
1) Compare against recently sold properties
When buying a property, comparing a potential purchase to recently sold properties is one way to gauge whether the selling price is reasonable. A point to note is that the properties should be comparable in terms of their size, condition, and location. Work with reputable real estate agencies as they will have professional agents who should be able to guide you on this. They will have a list of recently transacted properties and can advise you on the best deal.
If the property you are targeting is slightly cheaper than market price, you may want to find out why. Is the property in deplorable conditions? Do you own check on the property with the help of the agent.
2) Compare against still unsold properties
When buying a property in Malaysia, you want your real estate agent to offer you the best price. If you think 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. If true, than you may want to look at other neighbourhoods.
3) Review rental prospects
If you’re buying a property for investment, do a bit of research on the existing rents in the neighbourhood 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. Next is to get quality tenants who will keep your property in good shape while paying rent in a timely manner. You don't want a tenant who will leave you with repair bills higher than their total rent payment!
4) The 1% Rule
Following from the previous tip, many home buyers 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. If you’ve recently invested in a property that costs RM2.4 million, and if you apply the 1% formula, the property should ideally give you RM24,000 a month. You can use the rent to pay your loan and if there is access, you may be able to cover all of your other expenses. If the property you buy generates less than 1%, then you have wasted your time and money buying it.
5) The future prospects of a neighbourhood
The value of a property can depreciate with time, and nobody wants a property that loses its value over a short time span. Having said that, how would you know if the property you buy now will still be valuable years later? You have to read and do your own research on the location that you are targeting, besides depending on the real estate agent for information. Find you what are the future prospects, and if none, how else can the property price go up! There are some areas in Malaysia which are undergoing urbanisation and redevelopment and you may want to look there.
PropertyGuru is suggesting three notable neighbourhoods in Malaysia that you could consider namely Bangsar, Puchong and Cheras.
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 plenty of food places, shopping malls, schools, a sports complex, and a hospital.
According to Savills’ data, houses in Bangsar appreciated between 2010 and 2017 by a staggering 239 per cent!
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. The neighbourhood is highly accessible by a well-connected road system.
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 per cent.
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.
The average property prices in the area demonstrated a compound annual growth rate of eight per cent, 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!