Updated: Should FTHBs Buy Sub-sale or New Projects Properties?
Propertyguru says, “Property ownership is subjective as it’s truly to each person's own, and how they decide to make the best out of what they have. Choose a property that’s within your budget and requirements.
If you’re looking for property for your own stay and use, a brand new property is good for peace of mind (in the first few years, anyway) and there are great rebates to encourage home ownership.
Nevertheless, if the new home you’re looking for is situated out of the way, a subsale property is a better choice as it’s located in a strategic and mature location.
As for investment purposes, new properties are appealing for their modern aesthetics, although there's the risk of the project being abandoned or not completed on time. Whereas subsale properties can be easily rented out as soon as you have ownership of it.” See here for PropertyGuru's full guide on the pros and cons of buying a sub-sale or New Projects property.
RC's take on the above
Sub-sale properties are “seasoned properties” put on the market for sale by owners. They might be 20+ year old properties or even “brand new” properties flipped by investors who bought them 3 years ago from the developer but never occupied or rented out.
In contrast New Projects (off plan) properties are offered for sale by developers. In the current economic climate, I think sub-sale properties are cheaper to buy than New Projects properties, ceteris paribus.
4 reasons why I think FTHBs should consider buying sub-sale properties :
1. There is a track record of price and rental transactions for sub-sale properties. For First Time Home Buyers who might not have the experience of evaluating New Projects properties, the information can be invaluable. See here for my tips how to find CMVs for any property, find out a property's USPs, discover its Walkability Score, and where to get price and rental transactions psf for past 5 years . A long read but I think FTHBs should understand how to evaluate properties that meet their needs BEFORE contacting a real estate professional.
2. You get better "value" for your Ringgit. It's not a big "secret". But everyone in the real estate industry from REDHA, MIEA and of course the negotiators hawking New Projects properties directly to FTHBs know developers pay 4% to 10% commission. Maybe even higher than 10% commission now as the buying interest for High End KL properties remains lackluster in 2022. When housing prices rose 5-10% pa like in the past, this was not a big deal. But last year, Knight Frank said KL was the WORST performing property market of the 25 APAC cities covered by their analysts - down 6%. ( In Malaysia buyers don’t pay any commission, sellers pay a commission of up to 3% to real estate agents to market sub-sales properties. )
3. Most off plan or New Projects properties are sold bare, ie no built in wardrobes, kitchen cabinets, lighting fixtures or major electrical appliances eg cooker, fridge, microwave oven etc. OK some developers might throw in 3 air cons. Maybe even cheap kitchen cabinets. But buyers of New Projects properties will probably need to stump up another RM25,000 to 50,000 to furnish their apartments before finding tenants.
4. Lastly a sub class of secondary market properties - auction properties- now look attractive in 2022. Many KLCC properties are on the auction block from RM600+ PSF up. If you are looking for bargain priced properties at 10-40% below "market valuation" just Google "Lelong KL xxxx - insert any 5* luxury condo or Branded Serviced Residence".
There are many FB groups run by registered real estate agents that have info on upcoming property auctions. According to Kay Hian UOB, after many years of easy credit, Bank Negara Malaysia is likely to hike interest rates by at least two times in 2022. Around the world, inflation rates are already increasing. I think but cannot be 100% sure higher loan installments might push some highly leveraged property investors to default.
But on the other hand, if you really want to buy a New Projects property why not Go.Direct? Provided you have done the required due diligence (IE checked out the current market values of comparative properties in the neighborhood, the property's USPs, Walkability Score, SWOT analysis, and 5 year transactions and rentals PSF of comparative properties) then why not bypass the developer's real estate agents and offer to take it off the developer's hands for 15-20% off. I did just that in 2000 when I bought my first 5* KLCC luxury condo for 10% off. No agent required.
Post Script
While there are certainly many advantages of buying New Projects or off plan properties, there are also many dangers if FTHBs buy the WRONG New Projects property. Check out EdgeProp's write up on abandoned property projects here.
I am not a registered real estate agent. If you are considering buying a property in Malaysia please consult a BOVEA registered valuer or real estate agent.
