Buying a property can be a daunting experience, for first-timers, second-timers or even for property investors. Whether you are buying to live in or for investment purposes, buying properties requires a lot of homework and research as one single mistake can cripple your finances.<\/p>\n
One of the first questions most property buyers ask is: Should I buy an under construction property or a sub-sale one? How do you decide?<\/p>\n
Here are some considerations you should think of when you are buying under construction or sub-sale properties.<\/p>\n
The Malaysian property market has favoured the \u201csell and build\u201d concept, where the developer starts selling before construction work begins. For property buyers, they would usually cross their fingers and hope for the best when they buy property off the plan from developers. If they are lucky, they will get a reasonably decent if not perfect unit plus they may see a significant appreciation in value once the project is complete.<\/p>\n
Under construction properties, or some would call it properties off the primary market, are popular among house buyers because of the discounts and freebies offered by developers. Here are some pros and cons you need to weigh before you decide to buy a property off the plan.<\/p>\n\n
PROS<\/strong><\/th>| CONS<\/strong><\/th>\n<\/tr>\n<\/thead>\n\n | Information is easy to look for<\/strong> | \n \nIt is very easy to spot a new development in the location of your choice. For all developer projects, you can just walk into their office or showroom or easily identify them at a fair or launch.<\/td> Financially locked until completed<\/strong> | \n \nWhen you buy an under construction property, you will have to wait for three to four years until it is completed. During this time, your credit with the bank is locked away for the total loan sum and it will be difficult to buy another property.<\/td>\n<\/tr>\n Getting a blank canvas<\/strong> | \n \nYou are going to be the first owner of the property. Everything from fittings to stoves are going to be in the best condition. Knowing there are no previous occupants serves as a psychological peace of mind for owners.<\/td> Uncertainties on final product<\/strong> | \n \nAs the project is yet to be completed, you don't know exactly what it would be like. You will have to choose your unit and predict the market demand. This includes the possibility of developments such as highways and public amenities like bus stops being built at their doorstep.<\/td>\n<\/tr>\n Discounts galore<\/strong> | \n \nThere are heaps of discounts for brand new property, as it is in the interest of the developer to sell off all the units as quickly as possible. From early bird discount, Valentine\u2019s Day discount, National day discount to VVIP discounts, you will definitely get some sort of discount.<\/td> You need to be patient<\/strong> | \n \nWhile having a warranty is good, developers may take a while to actually act on the defects and repairing one may cause another to crop up later on.<\/td>\n<\/tr>\n The choice is yours<\/strong> | \n \nThe earlier you decide on your purchase the more options you have when it comes to choosing the best unit. So if you have set your mind on buying a particular development, being an early bird is advisable.<\/td> Taking on more risks<\/strong> | \n \nAs you are buying the property based on plans and models, the quality is not guaranteed. \n \nThere are cases of developers abandoning the project due to lack of financing, too. This is why it\u2019s important to choose reputable developers when buying off the plan.<\/td>\n<\/tr>\n It comes with warranty<\/strong> | \n \nBrand new properties from the developer typically come with a defect liability period of up to 24 months. It entitles the owner to get the developer to rectify any defects in the unit, like bathroom leakage, cracks in the wall, or door hinges that are not properly installed.<\/td> What you see may not be what you get<\/strong> | \n \nKeep in mind that not all the fittings, furniture and electronics come with your purchase. Do ask the sales personnel about it and they would clarify what items are included and what are not.<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n <\/span>Sub-sale properties<\/span><\/h2>\nPROS<\/strong><\/th> | CONS<\/strong><\/th>\n<\/tr>\n<\/thead>\n\n | What you see is what you get<\/strong> | \n \nGet a real feel of what you are buying. When buying a property via a new launch, you can only imagine what the view would be like. But for a completed property, you can take a real look at the view. You also do not have to second guess how it will be. You can see the unit, the view, the finishing and also your neighbours. On top of that, the real figures such as rental and transaction price will be available.<\/td> Difficult to look for potential properties<\/strong> | \n \nLooking for a good sub-sale deal means you need to view a range of individual units, in various conditions. You will have to check the condition of the units, market valuations and rentals of properties repeatedly till you find the suitable one. You will also need to negotiate with different owners, agents and lawyers.<\/td>\n<\/tr>\n Immediate cash flow available<\/strong> | \n \nWhen you buy sub-sale, you will be able to rent it out immediately and collect rent to pay for the mortgage. If you are lucky, you may also have an existing tenant paying rent at market price. Not having to spend money on agent fees to get a tenant will already save you money.<\/td> Seller hazards<\/strong> | \n \nThere are some seller hazards that you could face while you are almost settling the deal. The seller may not want to sell the property or may increase the price. If the price is above the bank\u2019s valuation, you will have to fork out your own money for the shortfall in the price.<\/td>\n<\/tr>\n No risk of construction delays<\/strong> | \n \nCompleted properties are as is and ready for you to play the role of landlord. Whereas there is always a risk of new launches not meeting their deadlines or developers can go missing abandoning the project altogether.<\/td> Buyer hazards<\/strong> | \n \nCheap really doesn\u2019t mean good. If the seller is too keen to get rid of the property that he is willing to slash prices to get rid of it, then you should approach with caution. You wouldn\u2019t want to end up having to deal with properties with previous cases of crimes or murder taken place in it or if the previous owner got a loan from the illegal money lenders with that address.<\/td>\n<\/tr>\n Fast move-in<\/strong> | \n \nOnce you lock down on a suitable property for you, it usually only takes about two months for the legal paperwork to be executed and you will be able to move into the property.<\/td> \u00a0<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n | <\/span>Under construction vs sub sale: upfront costs<\/span><\/h2>\n\nUnder construction<\/th> | Sub-sale<\/th>\n<\/tr>\n<\/thead>\n | Down payment: minimum 10%,<\/strong> but the developer may offer a discount or rebate, allowing you to fork out a lower (or zero) down payment.<\/td> | Down payment: minimum 10%<\/strong> | \n \n\u00a0<\/td>\n<\/tr>\n The developer may offer to cover some or all of your legal fees and stamp duty.<\/td> | Sale & Purchase Agreement (SPA) legal fees<\/strong> | \n \nFirst RM500,000: 1% \nNext RM500,000: 0.8% \nNext RM2,000,000: 0.7% \nNext RM2,000,000: 0.6% \nNext RM2,500,000: 0.5%<\/td>\n<\/tr>\n SPA stamp duty<\/strong> | \n \nFirst RM100,000: 1% \nRM101,000 - RM500,000: 2% \nRM500,001 - RM1 million: 3% \nAbove RM1 million: 4%<\/td>\n<\/tr>\n Loan Agreement legal fees<\/strong> | \n \nFirst RM500,000: 1% \nNext RM500,000: 0.8% \nNext RM2,000,000: 0.7% \nNext RM2,000,000: 0.6% \nNext RM2,500,000: 0.5%<\/td>\n<\/tr>\n Loan agreement stamp duty<\/strong> | \n \n0.5% of loan amount<\/td>\n<\/tr>\n Memorandum of Transfer stamp duty<\/strong> | \n \nFirst RM100,000: 1% \nRM101,000 - RM500,000: 2% \nRM500,001 - RM1 million: 3% \nAbove RM1 million: 4%<\/td>\n<\/tr>\n Miscellaneous <\/strong> | \n \nMortgage and fire insurance, utilities deposit, repair and renovation costs, etc.<\/td> Miscellaneous <\/strong> | \n \nMortgage and fire insurance, utilities deposit, repair and renovation costs, etc.<\/td>\n<\/tr>\n <\/td> | Valuation fees<\/strong> | \n \nFirst RM100,000 = 0.25% \nNext residue up to RM2 million = 0.2%<\/td>\n<\/tr>\n <\/td> | Real estate agent\u2019s fees<\/strong> | \n \nAbout 2% to 3% of property price<\/td>\n<\/tr>\n<\/tbody>\n<\/table>\n\n With under construction properties, you may fork out fewer upfront costs, as the developer may offer discounts and rebates to offset your down payment, or cover part of the other upfront fees. But you should also be aware that some developers may artificially inflate<\/a> property prices to offer seemingly attractive rebates.<\/p>\n So whether you\u2019re buying a property to stay in or invest, you must research sufficiently to ensure you do not buy an overpriced property or a property that you will have difficulty re-selling or putting it up for rent.<\/p>\n Do you have any thoughts on buying either of these? Let us know in the comments!<\/p>\n |
|---|