Homebuyer’s Guide 101

homebuyer-guide

Don’t get lost in translation – use this handy home buyer’s guide to understand what the common home buying terms are, and get the answers to the basic questions that you may have. We will continue building up this guide as we go along. xms amssa  🙂 Got a question or a glossary term to add here? Contact us using this handy form.

I’m thinking of buying a new home. What do I need to know?

Read the entire GoodPlace.my blog. 🙂 But for starters, here’s the least you need to know.

You have two options to consider when purchasing property:-

  • The first option is to purchase a property even before its completion.
  • The second option is for buyers to purchase property right after its completion.

That was a no-brainer, I know, but we gotta start somewhere :). As you would guess, the first option is predominantly more popular. What developers would do is to put properties up for sale and sell them “off the plan”. It is important to know that the Housing Developers Act would require developers to build and complete properties within a three-year period, right after the buyer has signed the Sales and Purchase agreement upon purchase of said property.

After the construction and the completion, solicitors will hold at least 5% of the selling price for 18 months in any case defect claims would arise.

The second option is also known as “Build Then Sell” (BTS). The Malaysian government strongly suggests developers to adhere to this scheme for a more seamless and convenient transaction between the seller and the buyer.

Buyers would usually pay a 10% payment in order to reserve the property. The remainder of the balance will only be paid after the property has been completed.

How About Existing Properties?

In purchasing existing properties, buyers would usually pay a 10% down payment of the purchase price. The down payment can be paid in two installments—a 3% down payment upon providing the letter of offer, and a 7% down payment within two weeks.

The remaining percentage of the property can be paid within three months. The interest accumulated will then be paid on the outstanding balance.

What Are The Difference Between Leasehold and Freehold Properties?

Freehold land is state land which is disposed off to an individual or an organization “in perpetuity“.

On the other hand, leasehold land is mostly owned by the state for a lease period of 60 or 99 years. Renewing leasehold properties for another 99 or 60 years is easy if payments of a premium will be made. This price of this premium is mostly determined and based on the current market value of the said leasehold property.

A new lease can also be requested within the duration of the existing lease. Existing lease will then be cancelled and application for a new lease should be processed.

Does It Matter Whether I’m Buying Leasehold Or Freehold Properties?

It’s all a matter of opinion, although the general consensus is that the value of freehold properties tend to be more stable in the long term. It is commonly thought that freehold and leasehold properties chart the same trajectory in terms of property appreciation for the first 30 years or so. After that period, the value of leasehold properties may stagnate or even decline nearing the expiry of the lease. Freehold properties would likely remain stable in value relatively speaking.

It is interesting to note that apartments and condominiums on freehold land are seen to be especially “attractive” to some investors. Apartments deteriorate but the freehold land it is built on tends to appreciate over time. As such, developers may seek to buy these freehold land parcels, and owners will often get compensated handsomely. For example, many think that Desa Kudalari (the first condominium ever built in the KLCC enclave; some say the Klang Valley!) is a prime candidate for an en-bloc purchase 1.

In Terms of Obtaining Financing, Does It Matter If The Property I Want To Buy Is Leasehold?

Depending how many years you have got left in the lease. It can be difficult to get financing if the property has got less than fifty years left on the lease.  Let’s say you’re eyeing a property with 55 years left in the lease. Even though you are able to get a bank loan now, you might find it difficult to sell in, say, five years time because your potential buyers would find it hard to get a loan then.

Definitely something to think about!

What Are The Common Property Types?

  • Bungalows. Bungalows are single- or double-storey “standalone” houses. In Malaysia, bungalows can be sized as large as 10,000 square feet. These houses are mostly detached and have its own land surrounding the house. In the Kuala Lumpur city, these are usually concentrated in older areas such as Bangsar, Ampang and Bukit Tunku. Newer areas such as Mont Kiara also sport some bungalows for sale, but many are part of a mixed development area.
  • Semi-Ds. Semi-D is short for “semi-detached”. These houses are joined beside another property. Usually, two houses will make up one block or one building.
  • Terraced Houses. These type of houses share a wall with the property beside it. End units, or terraced houses that are relatively bigger and have extra land, are mostly renovated and reconstructed in order to increase built-up area. These are also more expensive. Terraced houses usually have one to three floors. Terraced houses are common in the suburbs such as Petaling Jaya and Puchong.
  • Town Houses. Town houses are similar to terraced houses. The only difference is that they are mostly located in upscale areas (such as Hartamas), and come with a heftier price tag.
  • Apartments. Apartments or flats are abundant in Kuala Lumpur and other busy cities and towns. These apartments may come in cheap or really expensive, depending on the location of the property. Most modern apartments or flats also come with a lot of facilities and amenities such as fitness centres, tennis courts, and swimming pools—adding up to the property’s value. The more expensive apartments are known as “condominiums”.
  • Condominiums. The only (slight) difference between condominiums and apartments is its number of facilities — meaning, the more luxurious the facilities, the higher possibility that it would be referred to as a ‘condominium’.
  • Branded Residences. Also known as “Hotel Homes”, these are fairly new. Branded residences are luxury homes and serviced apartments with hotel-like services such as room service, concierge and security. These also carry “hotel brands” such as Ritz Carlton, Mandarin Oriental and St Regis. GoodPlace has covered branded residences in an article here.
  • Gated Communities. Note that these are not mutually exclusive from the others above. Gated communities are property developed on a guarded perimeter that encloses houses. There is controlled access to the gated community’s houses, and visitors would have to pass through security before allowed entry. Mostly, gated communities have modern security systems that would keep the community safe and secure, as well as offer a 24-hour roving patrol for enhanced security.

How Do I Know How Much Is A Property Worth?

Very easy! Download this guide here and we’ll show you step-by-step on how to value a property accurately. Once you have read that guide, follow the steps in this guide for an example calculation.

What Is Rental Yield?

This.

Do Foreigners Need Legal Approval For Buying Properties In Malaysia?

Yes. Foreigners must take note of the necessary steps before buying property in Malaysia, as State approval is required before acquiring property. Freehold land and leasehold land are both properties that can be purchased by foreigners.

Do note that there is a RM1,000,000 minimum purchase limit for foreigners.

Do I Really Need An Agent If I Want To Buy A Sub Sale Property?

Strictly speaking, no, you do not need an agent. However, in most circumstances I do recommend that you engage a reputable AGENCY (as opposed to a sole negotiator that you come to know via online property sites). A good agent will help you look for opportunities based on your requirements, but you will still need to do your own due diligence.

The most common ways to look for sub sale properties are through online property classifieds websites and newspapers. Alternatively, you can also use our DealMatcher service where we will do the research for you. For more information on the GoodPlace DealMatcher, click here.

I Would Like To Buy A Property To Sell It Quickly To Make Money. What Do I Do?

You’re into the business of flipping properties, and you should read this guide.

I Have Been Told That {Insert Area Name Here} Will Be Hot. How Can I Know For Sure?

You can’t be 100% sure, simply because there’s just too many variables at play when it comes to knowing if an area is going to grow quickly. You can, however, do a quick analysis which will give you a good indication if there’s good potential for future growth. Follow this guide.

  1. http://klcccondominiums.com.my/desa-kudalari/
About Khai Yin

When I am not writing for GoodPlace.my and helping my readers find properties though the DealMatcher service, I spend time doting on my three kids: Wenyi, Qinyi and Eian. My personal stuff, some published essays and contact details can be found at khaiyin.com

Comments

  1. how do i get the guide to check how much a property is worth?

    thanks

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