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Freehold titles are still highly sought after, but their numbers and their weight in buying decisions are diminishing.
Freehold titles enable a claim of ownership in perpetuity – or for as long as there is land and a sovereign power to recognise that ownership. In contrast to freehold titles, leasehold properties are only owned for a fixed period – typically anywhere between 30 to 99 years (except for Sabah and Sarawak, where some old titles do carry a 999-year leasehold tenure).
The primary reasons for purchasing land or property, especially for most first-time home buyers, typically extend beyond the basic need for shelter. For many people, the advantage of being a homeowner comes with the privileges of inheritance and individual sovereignty – becoming the ruler of one’s own domicile and enabling one’s offspring to enjoy the same.
“Freehold properties are the highest category of holdings since its tenure is forever. In other words, it is a grant in perpetuity,” says Datuk Paul Khong, the managing director of Savills (Malaysia) Sdn Bhd.
A recent Facebook poll supported this assertion by showing that the majority of respondents preferred buying a property with a freehold title rather than a leasehold title.
Do you prefer buying freehold or leasehold?
Of the 120 respondents who participated in our Facebook poll, only 22% indicated a preference for buying property with a leasehold title while the majority (78%) said they would prefer buying freehold property.
When considering a purchase decision solely based on a decision between a freehold or leasehold title, the choice is clear – home buyers prefer the certainty of ownership in perpetuity. That distinct preference gets muddled when the question is framed in the context of considering other factors that typically go into the purchase of a property.
Is tenure relevant as a criterion when buying property?
In our 2018 Buyer Sentiment Survey, 62% of the 1,786 respondents indicated that the tenure of a property’s title is a relevant factor to consider when buying a piece of property, while only 16% felt it was not a factor worth considering and 22% remained undecided.
When considering the tenure of a title against other factors that typically arise when approaching the decision to purchase a property, the possibility of ownership in perpetuity evidently became less important.
What are the top three criteria to consider when buying property?
Location, safety, and price were consistently the top three criteria selected by the majority of respondents in the 2018 Buyer Sentiment Survey. The tenure of title became less important a factor when considered alongside other criteria – factors such as the availability of public services, facilities, the connectivity of the neighbourhood’s roads, and the potential rental yield became more important.
Freehold properties are getting scarcer – and that perpetuity is not guaranteed.
According to Datuk Paul Khong, “Today, the number of freehold titles are diminishing, and newer projects are moving towards leasehold lands. Usually, freehold projects are developed from old freehold plantations which were mostly given the titles centuries ago.”
“As freehold lands become scarce and pricey, developers have shifted their focus to secure more state alienated lands to develop their high-rise strata projects,” says Datuk Paul Khong.
It is partly due to our need for ownership in perpetuity that freehold land titles are so highly valued and sought after – but even in this age, with the world being almost entirely democratic, home buyers often neglect the fact that eternal land titles can be converted to grants for a fixed number of years, or purchased by the government in a procedure known as forced acquisition.
With a higher degree of development necessitating master plans of greater density and depth in the urban era, governments are increasingly more likely to rely on converting freehold titles to leasehold, or forced acquisitions – in order to secure the land necessary for strategically located infrastructure projects and homes to support growing populations.
The possibility of forced acquisitions, or freehold titles being converted to leasehold, may have been lesser concerns for previous generations of home buyers – when there used to be considerably more land to go around. In less developed times, the government could acquire wide swathes of buildable land without having to infringe on the sanctity of private ownership.
How does it impact me?
Despite the real possibility of governments reacquiring property, often at prices determined by their choice of valuers, freehold properties continue to yield the highest rates in capital appreciation and rental.
The difference in price between properties with freehold and leasehold titles may be due in large part to perception, as Datuk Paul Khong puts it, “Every investor tends to look for a landed residential property with a freehold title, which is perceived as the ultimate position. Anything less will call for a discount on price and lessen its appeal.”
Vicky How, a licensed valuer registered with the Malaysian Board of Valuer, Estate Agency and Appraisal (BOVAEA) and a director of Henry Wiltshire, an international estate agency company, further describes the reason for the declining value of leasehold titles, “The shorter the lease, the less value it has and many banks may not approve the loan if the remaining lease of the land is less than half of the 99 years lease. If the tenure of the lease remaining is less than 40 to 50 years, the purchaser can only purchase with cash in hand.”
As the remaining tenure of a leasehold title decreases with the passage of time, a leasehold property is understandably viewed as less valuable – ownership lasts only as long as the lease is valid and any renewal premiums due would be factored into the selling price by prospective buyers as the initial costs of ownership.
“Even if the land is acquired cheaply, the premium to be paid for the renewal/extension of the lease may be more expensive in comparison to the price of purchase which is valued relying on the remaining lease over the land,” says Vicky How.
What can I do about it?
The extension of a lease is subject to the government’s master plan for the area – leases for land in developed areas are more likely to be extended, albeit often for shorter periods – and an extension of a lease requires the payment of a premium that is dependent on the type of property. Datuk Paul Khong says, “There is a possibility of renewing the leasehold title but it is subject to a new premium payable to the state and renewals are usually only sorted within the last 10 years or less before its expiry.”
According to Vicky How, “The Valuation and Property Services Department (Jabatan Penilaian dan Perkhidmatan Harta) will value the property to determine the market value of the land. The premium is calculated differently in each state and the rules applicable in Selangor is under 7 of the Selangor Land Rules 2003 and Selangor Quarry Rules 2003 entitled “Premium” which is calculated as follow (excluding the price of the building constructed on the land): Premium = ¼ × 1 ÷ 100 × Market Value of the Land × Number of Years of Renewal × Land Area (in Square Feet).”
There is no compensation due to the owner for the expiry of a lease – once the lease expires, ownership of the land reverts to the state. As Vicky How puts it, “Upon expiry of the lease, the ownership of the land reverts to the state authority including any construction upon it.”
According to Datuk Paul Khong, “The leasehold renewal rights rest with the state and is not a lawful right of the leasehold owner. However, residential properties usually stand a higher chance of renewal, unless the state has some major redevelopment plans for the particular area.”
Conversions of property titles from leasehold to freehold are not completely unheard of – the necessary provisions for such conversions already exist in Malaysia’s current National Land Code.
In July of 2018, the state government of Negeri Sembilan pledged to convert leasehold properties with titles nearing expiry to freehold – with a formal request for a conversion of one property made by any individual who holds more than one leasehold title, and subject to the approval of the federal government.
Why choose leasehold properties?
According to Vicky How, leasehold titles can be the more practical choice, “Despite all the aforesaid factors, it would be ideal to purchase the leasehold property as it is more affordable in comparison to a freehold property and the value of property with 99 years remaining in a leasehold title tends to go up in value for the first twenty-five to thirty years of the leasehold tenure.
“Location may also play a factor as a leasehold property or land in preferred locations in Kuala Lumpur and Selangor may be cheaper compared to a freehold property in the same area. Furthermore, leasehold property with less than 40 to 50 years tenure is ideal for short-term farming purpose or storage purpose in comparison to year to year tenancy to lock in the price.”
But in Datuk Paul Khong’s view, there is a downside to leasehold titles, “We can observe Petaling Jaya Sections 1 to 3 (for example the Petaling Jaya Old Town area) and note that the rejuvenation factor in the neighbourhood is rather weak when the leasehold shortens below the 50-year tenure. These areas become blighted and the redevelopment of existing old houses becomes minimal. These neighbourhoods lose their shine and age with the times.”
Datuk Paul Khong is the managing director of Savills (Malaysia) Sdn Bhd. Savills is a global real estate services provider listed in the London Stock Exchange with more than 600 offices and associates in over 60 countries. Read Datuk Paul Khong’s original contribution here.
Vicky How is a licensed valuer registered with the Malaysian Board of Valuer, Estate Agency and Appraisal (BOVAEA). She is currently a director of Henry Wiltshire, an international estate agency company. Read Vicky How’s original contribution here.
The views and opinions expressed in this article are solely those of the contributors. These views and opinions do not necessarily represent those of StarProperty.my.
Bangkok is one of the top property investment heavens in the region for buyers who prefer a vibrant city that is burgeoning with tourism.
Located in the heart of Southeast Asia, Bangkok is the capital of Thailand and most populous city in the country. Besides being a perennial tourist destination in Asean, the city is also ranked as the most livable location for Asian expatriates in Thailand according to a survey report released by ECA International in early 2019.
However, for most foreign buyers, buying a property in a foreign country like Bangkok could be daunting, as it might be restricted by the foreign ownership regulations, investment requirements, taxes and more.
In collaboration with Capital One Real Estate, the upcoming StarProperty.my Forum 2019 will feature Bangkok’s property market, with property agents and speakers sharing their insights and also conducting one-to-one consultations for those interested in purchasing a property there.
The event will be held on 6 and 7 April at Menara Star, from 1pm to 6pm.
The key highlight of the forum is the free seminar titled “Where is Thai property heading after the General Election in 2019” by Capital One Real Estate sales director Nutcha Jiota.
According to Nutcha, the price for Bangkok high-rise residential increased steadily by 5-7% per annum over the last three years.
“The price of Bangkok property will continue to rise but only in the commercial business district (CBD) area. The average price of a new project in the Sukhumvit area is ranging from 170,000 baht to 240,000 baht per sqm or RM2,000-3,000 psf,” she explained.
The forum will also exhibit The Nest 71 Sukhumvit, a freehold condo project located at Sukhumvit 71. Located not far from the BTS Phra Khanong, the project is a transit-oriented development (TOD) with 515 units in total. The price ranges from RM461,000 to RM867,000 with the price of RM1,479 psf.
Being the serious business that it is, strategic property investment requires a lot of market intelligence reports. You don’t invest by listening to others; you invest with your expertise.
I will share my investment outlook with readers in four broad areas: risk, opportunities, trends, and outlook.
In 2018, the trade war between the United States and China was a hot topic among key global players. Its effects will continue this year and leave investors on edge. With the government shutdown in America, the investment risk keeps rising.
The global economy in 2019 will witness lots of volatility and upheaval, especially in the advanced economies.
Change in investment approach
When I was attending a real estate course at the University of Chicago, I learnt that the location phenomenon has gone. In fact, quoting “location, location, location” as the three main attributes of any real estate investment is now referred to as an old joke.
Instead, real estate has three critical asset-level dimensions – namely property type, geography, and life cycle.
It is about the demographics of buyers, life-cycle of real estate and, most importantly, adopting a different perspective.
Nobody is interested in a rundown property. Everybody is looking for new condominiums and properties that promote a luxury lifestyle. Branded residences such as Ritz Carlton, Sofitel and Jumeirah are favoured by many investors.
People are also looking for short-term rental properties such as small apartments and condo units so that they can leverage on the Airbnb platform.
In the long run, investing in these properties will be a smart move.
Good investment entry point
In the Klang Valley, many investors are now focusing on Old Klang Road (OKR) because the area is connected to five major points: Puchong, Petaling Jaya, Mid Valley, KL Sentral and KLCC.
Many developers, infrastructure and market dynamics are at play in OKR. This is where smart investors take a position, looking at this area from a strategic perspective.
Ultimately, this place will become an investment hotspot in Malaysia. It is undervalued by 15% to 20% and still not saturated. It is still growing.
If you are looking to invest, you have to take a position in the real estate cycle when it is either in the introductory phase or the growth phase. At this moment, OKR is in the growth phase.
Shan Saeed is Chief Economist at IQI Global, a leading property and investment company. He has 18 years of financial market experience in the areas of private banking, risk/compliance management, commodity investments, and brand and business strategy.
PETALING JAYA: StarProperty.my Fair is back – showcasing some of the latest housing projects nationwide by reputable developers.
The fair will be held from today to March 3 at Starling Mall here from 10am to 10pm.
Developers taking part in the fair include Matrix Concepts, Gamuda Land, Paramount Properties, Setia Haruman, East West Marketing, MRCB, Mayland, Modern Pandora Sdn Bhd (Trinity Group) and RedBricks Realtor.
Pre-register visitors will receive a complimentary CTOS Score Credit Report offered by CTOS Data Systems Sdn Bhd.
Those attending the fair will get a free electrical appliance each after they make a booking with any of the participating developers.
Also, those who successfully signed the Sale and Purchase Agreement will obtain a RM500 cash rebate.
The fair will also feature esteemed speakers who will deliver nine home-related talks ranging from feng shui, interior design, financial health to investment tips on March 2-3.
The StarProperty.my Fair@Starling Mall is marked as the first station for the year-long “Beli & Menang” homebuyer reward programme with a vehicle as the grand prize.
PETALING JAYA: The residential overhang in Malaysia was at the “worrying” level, said Rahim & Co executive chairman Tan Sri Abdul Rahim Abdul Rahman in the Rahim & Co Seminar 2018 themed “The Malaysian Property Market: Where Are We Heading Post-GE 14?”
As announced by the National Property Information Centre (Napic) earlier, the number of residential overhang in the first half of 2018 (1H2018) stood at 29,227 with the value of RM17.24bil.
The Napic’s residential overhang figure excluded residential units built on commercial land such as serviced apartment, Soho, Sovo and Sofo units.
However, based on the Rahim & Co’s research, the overhang situation is even worse if the completed yet unsold units of the “commercial-titled residential property” are taken into consideration.
In the presentation by Rahim & Co research director Sr. Sulaiman Akhmady Saheh, the residential overhang recorded a higher number of 41,999 units worth RM26.84bil at 1H2018 including serviced apartment and Soho. Majority of the overhang units are found in Johor (32.6%), followed by Selangor (16.5%).
Johor recorded 13,691 overhang units worth RM9.82bil, an increase from 8,320 units in 2017. In Selangor, the overhang number stood at 6,909 worth RM5.34bil. Besides, other states with high overhang rate including Kuala Lumpur (4,791) and Penang (4,142).
Among all housing types, the number of overhang in the serviced apartment segment is on the rise and currently represents the highest number of overhang unit-type nationwide.
From the price perspective, upon the inclusion of the Soho and serviced apartment, the residential within the price bracket below RM500,000 represented half of the total overhang units. Meanwhile, there are 61% of overhang units priced below RM500,000 excluding the serviced apartment and Soho.
The survey attributed the market slump to low housing affordability, while the increasing house price and housing cost burden are the key factors leading to low affordability rating.
The data also showed that Malaysia’s property price spiked significantly between 2009 and 2016, and the company defined it as the “booming period” — where the house price hikes persistently due to the ease in credit access, low-interest rate, the available of DIBS and the RPGT relaxing period.
However, the household income growth is not in sync with the house price growth during the period. The stringent housing policies and the mismatch in product pricing eventually lead to the current unaffordable housing situation.
Given that the Malaysian median household income of RM5,228, the housing within the affordable price range should be at RM188,000, based on the median multiple approach.
However, in 1H2018, only 29% of the new launches were priced below RM250,000, and this has contributed to the rising overhang numbers.
Separately, in the press conference, Abdul Rahim said that the current housing market is not a recession, but just an oversupply problem, and he expects the overhang issue to improve in the next two years.
Rahim & Co real estate agency director Robert Ang concurred the statement by adding that there is no need for artificial control on the local property market.
“Malaysia is a mature economy, just let the market forces to decide the direction, the housing market will eventually balance and sought itself out,” said Ang.
Original Chinese article by Lee Yan Li
Translated by Ng Pau Ling
Being a landlord involves lots of responsibilities. To succeed in property investment with high rental yield, a landlord must learn the obligations and details of the renting process.
Part 1 of the article had explained about the Tenancy Agreement, the additional clause and fixed-term tenancy. The article also shared tips on how to hire the right property agent.
Continuing with the tenant and landlord topic, the real estate management firm PropropManagement Pte Ltd’s Wong Zhi Cheng and Chen Peng Tian will further share their experiences in rental property investment.
Letter of Intent (LoI) and Tenancy Agreement
After the potential tenant has viewed the property and expressed his interest to rent, the next step is to sign the Letter of Intent (LoI) and pay a booking deposit.
The LoI, in short, is a letter proposing the potential tenant’s intention to lease the property. In the letter, it will indicate that the tenant and landlord will negotiate and sign the Tenancy Agreement within an agreed time (usually seven days).
After signing the LoI, the landlord is not allowed to rent the said property to any other party. “However, if the landlord chooses to do so, he will need to refund the booking deposit fully,” said Wong.
If the tenant decides not to sign the tenancy agreement, then the booking deposit will be forfeited.
“For example, I’ve encountered a troublesome tenant who refuses to sign the Tenancy Agreement at the last minute,” said Wong, adding that he practised his rights to forfeit the individual’s deposit.
“The tenant was unhappy and claimed that he would be filing a suit against me if I do not refund the money.
“My agent suggested that I pay him back to end the dispute, but I chose to act based on the signed document.
According to Wong, he was entangled in the situation for nearly half a month, with the tenant eventually changing his mind to sign the tenancy agreement. However, Wong was not willing to accept the problematic tenant as he believed that that particular person would cause more trouble in the future.
Tenant screening Looking for a good tenant is not easy. Wong advises landlords to always insist on meeting with the tenant before signing the tenancy agreement.
“I will suggest to landlords not to rent their property to a tenant that avoids eye contact and with signs of guilt and anxiety upon the meeting,” said Wong.
He added that the landlord could also ask for more details such as their occupation, workplace, and even a referral from the former landlord.
“If the tenant hesitates to provide such information, then you might need to reconsider whether to rent your unit to him as this could be a sign of trouble,” explained Wong.
Chen also advised owners to follow their instincts. “If you have a bad feeling about renting out to someone, then don’t,” he said.
According to Chen, he once rented out his unit to a foreign lady who was very cooperative at the beginning as she provided all the information he needed. However, Chen felt something fishy about her.
“Only after she moved in did I realise that she turned the unit into a party house and invited drinking guests.
“Not only that, but she also banged into the neighbour’s car,” said Chen.
If the tenant is rushing to move into the property immediately after viewing it, this could be a sign of a bad tenant as well.
This is a hint that the individual is disorganised without proper financial planning. Even worse, he might have just been evicted by the former landlord and is, therefore, rushing to find a new place.
An ideal tenant should be able to negotiate the Tenancy Agreement a month earlier and pay the deposit on time. This shows that he is financially stable with proper planning.
“However, if the potential tenant requests to pay the security deposit in instalments, it means that his financial situation is not stable,” said Wong.
How to choose an investment property?
Residential and commercial properties are the most common type of investment properties for rental yield in Malaysia. However, as a new entrant to the property market, it is recommended to start from a residential investment.
According to Wong and Chen, a business hub generally needs an extended period to mature into a happening area.
Moreover, the leasing of commercial properties will involve professional lawyers. Together with the restriction and limitation associated with commercial properties, it is a complicated process for a new real estate investment. Therefore, it results in a higher risk compared to a residential property.
For the residential segment, high-rise properties are performing better compared to landed properties. This is because strata properties provide facilities and security systems that offer conveniences to the tenant, hence its ability to fetch a higher rental.
However, investors must pay attention to the land title when investing in high-rise properties.
“For example, the small office home office (SOHO) and serviced apartment were built on the commercial land.
“Since the land is purposed for conducting business, hence the residential property built under the commercial land title will be subjected to a higher commercial rate on utilities and quit rent.
“This will not only burden the tenant but also negatively impact on the rental market,” said Chen.
He also suggested that investors focus on three bedroom condos rather than the studio apartment.
“Given the similar size, a three bedroom unit is easier to be rented out compared to the studio,” said Chen.
How to evict a bad tenant?
Chen opined that the Tenancy Agreement in Malaysia tends to protect the tenant’s interests. “For example, the landlord could only file the Eviction Order to remove the tenant if he has failed to pay the rent after the notice date expires.”
According to Chen, it will take up to six months for the court to issue the order. “Even if you have successfully evicted the bad tenant, it has already cost you months of loss rental,” said Chan.
Landlords who want to recover the rents will also have to incur additional cost for the lawyer fees. At the same time, the premises could not be rented out to others as it will serve as evidence for the lawsuit. Therefore, it is not worthy to initiate a rent recovery process unless the sum exceeds RM10,000,” said Chen.
The owner has no rights to change the locks or cancel the access card to their property. It is illegal in Malaysia to lock the house without going through the proper eviction process.
Chen shared an informal but lawful way to solve this issue: “If the tenant fails to pay for the utility charges but is still staying in the property, the landlord could write an official letter to the supply authorities to cut off the water and electricity supply.
“This approach may prompt the tenant to settle the rent and the utility bills,” said Chen, adding that both parties can then enter into a negotiation with the goal to solve the late rents.
In a case where the tenant cannot be contacted, the landlord may prepare a “late rent notice” which includes the tenant’s details such as name and IC number, together with the late rent due.
The notice can then be posted on the front door of the rented property to alert the tenant with a specific response deadline.
The notice typically spells out an ultimatum — if the rent is not received within a specific period, then the landlord has the right to evict him.
If the tenant fails to respond after the deadline, the landlord could lodge a police report regarding the lost of contact with the tenant and express his worries regarding an accident in the house or an abuse towards the property.
“The owner has the right to unlock the unit with the presence of the police officer and an independent witness, if the tenant still could not be reached after the police report,” said Chen.
Tenant is the real asset
“A property should be viewed as debt as long as you are still servicing the mortgage as it belongs to the bank, not you.
“In fact, the tenant is your real asset as they are the one that helps you to pay the home loan,” said Wong, adding that investing in a quality tenant is the key to a successful property investment.
*Read Part 1 to know more about the Tenancy Agreement, the additional clause and fixed-term tenancy. The article also shared tips on how to hire the right property agent.
Renting out your property to repay the mortgage is the easiest way to gain profit from your real estate investment.
However, being a landlord involves lots of responsibilities. Therefore, you must learn the obligations and details as a landlord to succeed in your rental property investment.
Real estate management firm PropropManagement Pte Ltd Wong Zhi Cheng and Chen Peng Tian has taken the liberty to share with StarProperty.my about the know-how of rental property, not only in identifying the obligations and responsibilities of both landlord and tenants, but also to prevent potential conflicts and disputes in the future.
Management and maintenance of the property
The tenancy agreement is a legally binding document between the tenant and landlord that states the obligations and rights of both parties in a said property.
It should specify what is and isn’t allowed in the unit, as well as your duties as a landlord and your expectations for the tenant.
In Malaysia, you could easily find a standard template for a residency tenancy agreement online. It consists of identical terms such the monthly rental, security deposit, duration of tenancy, the responsibility of the tenant and landlord, prohibition of activities and more.
Generally, the landlord will be responsible for the property maintenance fees and the repairs and maintenance of the amenities, while the tenant will pay for the water and electricity charges.
However, there are grey areas for liabilities such as the Indah Water sewerage service. In this case, an additional clause on the written agreement could spell out specifically and sufficiently the payment obligations to prevent conflicts.
Wong and Chen also suggested that the landlord could set a clause on the wear and tear of the home appliances. For example, the landlord will take full charge of any repairs occurring within 14 days after the tenant moved into the unit. However, the tenant will be obliged to pay for the cost after that.
“For example, if the tenant uses the air-cond for long hours on a daily basis, the regular service cost for the machine should be counted towards the tenant,” said Wong, adding that it should be listed down in the Tenancy Agreement.
Moreover, he suggested that the landlord includes a clause on the loss of keys and access card during the lease.
“I will clearly state in the agreement that a fine of RM200 will be charged in the event of missing keys and access cards.
“It is not about punishing the tenant, but to ensure that they are careful and responsible to the premises,” said Wong.
Tenancy agreement with a renewal option
The tenancy agreement in Malaysia is generally signed on a 1+1 year basis to limit the termination of the tenancy.
The first 12 months of the lease is a fixed-term tenancy. Neither the landlord nor the tenant could terminate the tenancy early without breaching the contract. Also, to protect the interest of both parties, a cancellation clause should be added to the Tenancy Agreement to clarify the penalties of the premature termination.
However, the next 12 months is not enforceable and it is optional for the owner and renter to continue with the lease. It allows both parties to terminate the contract without a breach or penalty. It is common for the owner and tenant to negotiate for the renewal terms two months before the expiry of the fixed-term tenancy.
Although the 1+1 year tenancy is widely used in Malaysia, the tenant and landlord could further negotiate the duration based on their needs.
Hire a real estate agent
A professional real estate agent helps to streamline, simplify renting logistics and find you a quality tenant.
However, one of the common questions of a first-time landlord is whether they should hire multiple agents to rent out their property.
“In fact, for veteran investors like us, we will generally engage up to 30 agents for a single listing to maximise the exposure of the unit.
“For the landlord, the more agent you engage, the higher the chance for you to lease out the unit,” said Chen.
He also advised the owner to be wary of dishonest agents with unethical practices. “There are cases where the agent misleads inexperienced first-time landlords into signing the Exclusive Agreement.
“The contract restricts on the exclusive rights for the listing and distribution of the property.
“Even if the owner has finally find a tenant based on his own effort, a one month rent is required to be paid to the agent as commission,” said Chen.
Wong added that the real estate agent would charge a one month rent as a commision for finding a tenant under the usual circumstance.
“Due to the high competency, it is unlikely for the agent to increase the price, unless the owner offers to pay extra to request for priority service.
“However, if the agent is offering services far below the market price, it might be a sign that he does not have a strong network connection,” said Wong.
Understanding the market
Moreover, it is advisable that a property investor do proper research before deciding to buy a house.
“When it comes to investment, it is not necessary to follow the property hotspots, but more importantly to understand the market of the location.
“I would suggest starting your first investment in the location that you are familiar with, such as the place where you grew up,” said Chen.
Besides, he also suggested that the landlord can offer a discount to tenants who pre-pay their annual rent, as it will reduce the hassle of knocking on their doors to collect rental.
Chen added that he would usually maintain the same rental after the first 12 months of the fixed-term tenancy to retain a quality tenant.
“If there is a necessity for the rent hike, the rate of increase will also be below 10%, as the residential rental growth in the market is slow,” he said.
*Stay tuned for Part 2, where we will delve into the Letter of Intent (LoI), tenant screening and tenant eviction.
So you may have read our how-to guide on purchasing your own home, and you may have even managed to accumulate enough funds for a down-payment on a home – but before you go ahead and seal the deal by signing on the dotted line, we highly recommend taking a look at these top three priorities to keep in mind when purchasing a property – as outlined by Christopher Chan, Director of the Malaysian Institute of Estate Agents (MIEA) and Associate Director of the Hartamas Real Estate Group.
3 priorities when purchasing a property - YouTube
Engage a solicitor
You’re about to venture into a landscape of legal and financial jargon – even if you’ve spent the better part of your life operating in these fields, you’re better off getting a trained and licensed guide.
There’s a reason an education in law takes at least a few years. Photo by Giammarco Boscaro on Unsplash
Getting your own lawyer will ensure that you’ve got someone looking out for your interests – as opposed to a developer’s designated lawyer who might be acting in the best interests of the party paying their fees. In order to avoid any conflicts of interests, the lawyer you engage will have to be a different lawyer representing the seller.
Legal Fees on Loan Documentation
This applies when the buyer wants to borrow from the bank to finance the purchase of the property. As with the lawyer’s fees, the scale of legal fees for loan agreements is stated under the Solicitors’ Remuneration Order (SRO) of 2005 and its related amendments. Take a look at the scale of fees stated in the SRO to know what to expect – the Third Schedule of the SRO provides for varying lawyers’ fees based on the purchase price of the property.
If you buy a property from a developer that is still under construction, it will be governed under the Housing Development Act of 1966. Schedule G and Schedule H of these housing regulations determine the schedule of payments to be made depending on the progress of construction (for landed and high-rise properties respectively).
Stamp Duty on Transfer
Stamp duties are essentially a transfer tax and this falls on the buyer. The buyer will have to pay for this when they buy a property. The stamp duty rates form the bulk of the buyer’s cost when they buy a property.
The government has given some exemptions on stamp duty – particularly transfers of property between spouses, parents, and children. Please also take note that when you buy a property from a developer, as long as the title is not issued, the buyer does not have to pay the stamp duty on transfer.
Under Budget 2017 (and again in Budget 2019), the government has given exemptions on stamp duties for first-time home buyers. So if a buyer buys a property up to a value of RM300,000, there’s a 100% exemption on the stamp duty on transfer. For properties above RM500,000, for the first RM300,000 it’s a 100% exemption – the balance is subject to the prevailing stamp duty rates (calculator here).
Will it be sunny skies or dark clouds ahead for Malaysia’s property market?
There are things we already know – such as the fact that even more homes remain unsold than last year. There are things we won’t know until we discover them – like what reasonable measures could help to house 80 percent of the Malaysian population. There are things that we can never know until we are told – like how people really feel about their prospects for homeownership and the property market in general.
That’s the very reason we put together this year’s StarProperty.my Buyer Sentiment Survey – so you can share your thoughts and feelings regarding homeownership in this new Malaysia. Is the government doing enough to make housing affordable? Would you be interested in purchasing a haunted house? How much is too much? Help us to answer these questions and not only will you stand to win prizes, you will find out how everyone else feels about the property market.
Despite the dark clouds apparently forming over the real estate industry, some signs of a continuing boom can still be found.
Some people are of the opinion that there is a bubble around Malaysia’s property market – and that it will burst sooner rather than later. If you’ve ever worried about keeping a roof over your head, you’ve probably heard it all: housing prices are up – wages not so much, “oversupply”, “bubble”. When investors want to get a read of the situation, to determine when to put money down on property, some may turn to home sales data.
Source: National Property Information Centre (NAPIC)
For some, these latest statistics from Malaysia’s finance ministry may point to signs of stagnating housing prices between the first and second quarters of 2018. To those who would cry “bubble”, this data may represent an ominous sign of things to come. To investors and real estate agents – the kind of people who handle the bulk of housing transactions in both the primary and secondary sectors of the property market – the future is still looking rosy.
Amidst all the pessimism and doomsayers, real estate agencies such as Full Homes Realty are opening new offices and setting lofty sales targets. This particular agency recently unveiled their new corporate headquarters in the strategic township of Bandar Kinrara, while exceeding their own sales target of one billion ringgit in one year.
They met the mark with a margin of three months to spare.
This high level of performance is a testament to the effectiveness of Full Homes Realty’s efforts in consolidating their teams – with sustained effort put into producing a more collaborative workforce that regularly shares knowledge and cross-sells property products between teams – instead of requiring them to be in constant competition. Despite the apparent slow-down, developers are continually formulating new and more creative packages to attract buyers. The willingness of developers to make their offerings more appealing provides agents with a wider range of products to work with and creates more opportunities for agencies like Full Homes Realty to make more successful deals.
Full Homes Realty’s recent consolidation exercise has apparently also created opportunities for younger talent to help drive this and other similar agencies toward a goal beyond mere survival. This emphasis on younger and leaner organisational structures has already borne fruit for agencies like Full Homes Realty, who have recently raised their target even higher – to a new height of 1.3 billion ringgit in total property transactions by the end of 2018.
This kind of optimism may seem rare these days – but that may not need always be the case. With the rise of search engines and social media in recent years, the property industry has evolved. Faced with these disruptive technologies, many real estate agencies have taken drastic steps to improve their services and stay competitive. Overall, this environment of competition is healthy for society – surviving agencies become better at what they do and the improved quality of service benefits homebuyers by setting a high bar of performance for other practitioners in the real estate industry to meet and surpass.