Property Investment In Malaysia

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Three Commonly Asked Questions

1. When to Invest?
2. Where to Invest?
3. What to Invest?

1 When is the Best Timing? (Soup)

You have to check your financial capability whether you are ready to purchase property:

Income profiles (with supporting documents Bank statements, payslip, etc)

Liquid cash flow ready
Check with bankers on your Debt Service Ratio (DSR) and borrowing capacity.
Income tax

There is no best timing to buy. Even in the worst economy, there are also good deals where owners
are incapable to service the installments and have to force sell at a price lower than the market price.
Besides, as there may be multiple developers projects in the same area, they are faced with
competition, thus have to offer higher rebates and furnishing package. Opportunity arises every day.
If you are financially capable, keep a good contact with your agent friends, developers launches as
well as visit www.newpropertylaunch.my often to compare and contrast great deals.
The longer you wait, the higher the price appreciated (especially with the upcoming GST, which
increases the building material costs). Developers will have to pass on the costs to the end-users
which are the buyers.

Invest what you can afford. The rule of thumb for loan eligibility:Tax declared income RM1,000 (per annum) = Loan eligible RM10,000
Tax declared income RM10,000 (per annum) = Loan eligible RM100,000
(If you plan to buy more properties, declare more tax!!)

Property Investment In Malaysia

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2. Where to Invest? (Appetizers)

Always stick around in KL City or within Selangor. Why? Do you know what are the factors that
contribute to a property increases in value.
Always remember the 3 BASIC Elements:-

1. PEOPLE
When there are people, which is KL-SEL (currently at 7million over population), people like it or not
will come to KL for all kinds of reasons because it is the capital city of Malaysia, a financial hub, CBD,
Government HQ, Education Hub, Commercial Hub, MNC Hub, International Airport, and etc. Young
people will come for:Kuala Lumpur is the capital of Malaysia and along with its neighbour state, Selangor, both location
consist an estimated population of over 7 million, and people go there for various reason as it is the
centre of everything from businesses, industries, facilities, education, entertainments and job
opportunity as well. All these are the factors that young people are moving into to these places.

Education
Job Opportunity
Business
Spending

2. JOB/BUSINESS
When there are people, there are activities in the market. People will look for employment, or
business. When there is job or business, people will make money.
When it is the city centre, big corporate and firms are being set up in these area, hence there would
be a bundle of job and business opportunities available.

3. MONEY
When people make money, they will need a shelter. Demand increases, thus property value
increases. For people who can afford, they will BUY a house, but for those who cant, they have to
RENT. For smart people, they will INVEST first.
When people have a job in the city centre, they work and they earn, that is where most of the cash is
flowing. In the mean time, obviously those that work in the city would need a shelter nearby for
convenient purposes. Thus there is demand in the market and property value increases.

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These 3 simple basic elements will always be the reasons why property price appreciated because of
a simple economic terms SUPPLY & DEMAND equation. When there are demand, there must be
supply, thus price goes up. For the year of 2012 and 2013, there are more than 500,000 incoming
migrants from other states moving into KL-SEL.
Not to forget the Economic Transformation Programme (ETP) and Vision 2020 which is to achieve 10
million population in KL, with all infrastructures upgrading and construction in progress. It will
increase the efficiency in transportation of population from further places into the central of Kuala
Lumpur which makes it Centre of Gravity. Thus, always stick around the CITY!

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3. What to Invest? (Main Course)

If you are to invest in KL-SEL, there are many choices available. There are mainly two kinds of
property which are Projects by developers as well as Subsale. So which is better?

Project OR Subsales ?
Buying a Primary Property means you are buying a brand new property directly from the developer;
Secondary / sub-sales means you are buying a previously owned property from a private owner.
Here is the comparison table for both:Primary
- If 90% margin of finance,
10% down payment
(Developer's rebate ranging from
3-10%, may occur Zero-down package)
that offset the 10% down payment)

Secondary
-May have higher down payment due to
property value.

- Approximately 10% for legal fees,

stamp duty and others
(sometimes borne by developer)

- Acquisition cost for SPA, Legal

fees, stamp duty and etc have to be
Self-borned.

Monthly
Repayment

- During construction period, only

need to service interest in instalments.
Full repayment begins upon completion.

- Immediate full repayment.

Discounts

-Depending on developer's packages.

May have early bird discount,
bumiputera discount, staff discounts
or member's privilege.

-Discount not available, but buyer

may negotiate with seller or real
estate agent.

Furnishing /
Renovation

-Some newly developed properties

come partially or fully furnished.

-For older properties, renovation may

be needed. Extra cash may be needed
for this.

Risks

-Delay in delivery
-Abandoned projects
-Stiff competition for rent and sale in
delivery period.
-Intangible and surrounding
infrastructure may differ from what
was told

-Major issues with house may not be

detected during viewing such as
termite problem, electrical wiring,
piping decay and etc which may requires
substantial amount of cash to repair.

Upfront Cash

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So Which Type of Property Stretches Your Ringgit The Most?

Project
Pros
Brand new and shiny. There are advantages and disadvantages in these properties. Developers
package often comes with rebate, which can reduce the upfront cash needed when buying the
property. Some units even come with basic furnishings such as kitchen cabinets and built-in
wardrobes.
For developer projects, it comes with Defect liability period (DLP), meaning there is a period where
the developer will address defects on your behalf at their own cost. Normally for property more than
RM100,000, at least 12 months of DLP from the certified date of completion is required.
You also get to choose the unit that you desire (if available), in other words you can choose your
house number, street number, facing view, etc.

Cons
There are some incidences where the projects were abandoned by developers. This is the greatest
risk as you will lose your deposit and all that you have expended. Besides, there can be delay which
prolong your interest payment and affect your financial plans. Thus, you have to do due diligence on
the developers company profile, past records and feedback from their existing buyers. Some
developers may charge at lower price so that the buyers can earn more from capital gain, and buyer
will come back for future launches.
Due to the number of new units released after completion, there may be a period of oversupply.
This makes it tough for owners to sell or rent due to stiff competition. To counter this problem,
majority of the owners will sell or rent the property at its present condition, however, buyers or
tenant will prefer over units with more complete furnishing. Thus, owners have to decorate their
units and put extra furnishings to attract new buyers.

Property Investment In Malaysia

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Sub-Sales / Secondary
Pros
When you buy from existing owners, you can physically touch, feel and see exactly what you will be
buying, the infrastructure, the neighborhood, and the amenities. These can be immediately
evaluated especially those in matured area, with everything more or less established.

Cons
The pitfalls are rather obvious; renovation and repairs. Sometimes you may have to redo the whole
propertys electrical and plumbing works. Other extensive renovations may be needed if the unit is
more than 10 years old or was badly maintained. These extra costs will not be financed by bank as
compared to developers fully furnished package. It may easily cost you between RM10,000 and
RM 100,000, or more, depending on the renovation and repairs required.
There is also higher acquisition costs; such as

Sales and Purchase Agreement (SPA)

Loan documentations
Stamp duty

It can also be very challenging to find a seller who agrees to sell at the agreed price, and you will
need three parties to agree mutually, namely the buyer, the seller and the bank. Valuation is needed
by professional valuers to estimate the market value of the property. If the value is lower than the
asking price, buyer may have to come up with higher down payment to make up the shortfall. The
home loans margin of finance is based on the market value, not the asking price.

In a nutshell, these two types of property have their pros and cons. Choose based on your needs and
risk appetite, financial readiness, and opportunities. Explore more new launch properties here at
www.newpropertylaunch.my

Property Investment In Malaysia

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Which First Property Should You Get?

If you happen to ask anyone new to the world of property why they have not buy their first home,
most will say that the prices of property have exceeded their affordability. However, there are some
who might tell you that they are holding out and saving to buy their dream home.
Now the question is, whether to hold on the money until you can afford your dream home. As the
property market in Malaysia booms and prices continue to soar, many property buyers find
themselves having to downsize their dream home from a landed two-storey linked house to a twobedroom condominium.
So do you:

Buy a starter home now? OR

Save up until you can afford your dream home?

Everyone will have different ideas on what constitutes a starter home. But in general, a starter home
is something you will be happy living in for at least five years or perhaps something that is perfect for
a single individual. On the other hand, one could potentially see themselves living in the same house
for the rest of their life, when they start a family.
The primary compelling reason will be of course, the money.

Get a Starter Home First

There are benefits to buying a starter home now rather than waiting for years to buy a dream
home. Malaysia home loan interest rate is still low compared to other countries:

Pakistan : 20%
Bangladesh : 14.75%
Philippines : 11.50%
India : 11.1%
Iraq : 9%

(source from http://asia.deposits.org/ as for the month of Aug 2014)

We should feel lucky to be in Malaysia, and seize the opportunity of having lower interest rate
before it rises in future.
Another consideration to be taken into account is appreciation of property. Buy what you can afford
today, may help expedite your goal towards getting a more expensive dream home in near future.
Ideally, you want to buy a property that will appreciate (or at least hold its value) so when you sell it
a few years later, you have equity to put into your dream home.
A property thats not affordable now will most likely be even less affordable in the future, if the
salary hikes remain at the same rate.
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Aiming for the Middle Ground

As a guideline to decide on your first home, consider the price difference between a potential starter
home and your dream home. If the difference can be saved up within a year, you may want to
consider waiting. However if the difference takes more than 5 years for you to save up, you may
want to aim for property price that falls in between what you can afford and your dream house.
Even if that means you are not able to afford a huge landed property in the best neighbourhood
right now, you may want to consider a medium-sized condominium or even look for property further
away from the city center that is within your price range.
By relaxing your criteria, you may be able to find something that suits your needs for the foreseeable
future until you can afford that dream home. Sometimes, it may take more than two houses to
finally own your dream home.

Property Investment In Malaysia

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6 Factors That May Result in Your Home Loan Being Rejected

Obtaining a home loan can be easy if you know what to do, and how to prepare for it. There are
various factors that can result in a home loan being rejected:-

1. Financial Score
How much bank can lend you depends on 4 key factors:1.
2.
3.
4.

Individuals risk profile

Property Valuation
Debt Servicing Ratio (DSR)
The max Loan-to-value (LTV) ratio / Margin of Finance

Each bank credit policies can differ greatly. The max borrowing amounts can even differ up to 3
times between different banks.
So what exactly is Debt Servicing Ratio (DSR)? DSR shows how much a persons income is used to
service debt installments and is represented as a % of income. It is derived from 2 main
components:a) Commitment
b) Income
Different banks have different requirement in the final DSR amount that is calculated, which may
amount to difference of 20%. Some banks recognize 100% of rental income while some only
recognize 80%. Some banks calculate based on Gross Income while some uses Net Income. Other
factors that impact DSR are income bracket, net worth, qualification and age.

2. Types of Land
The land tenure is divided into

Freehold Land
Leasehold Land
Malay reserved land

Buying freehold property will not be a problem for the banker to finance. However for leasehold
(especially those with less than 60 years left) and Malay Reserved land, it may difficult to secure
financing from certain banks. These lands are considered high risk for banks as they are difficult to
resell in an auction, due to its restrictions. For new leasehold property with 99 years period, it will be
a less significant problem.

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3. Price of Properties
For properties below RM100,000, it will be difficult to secure financing for it. Though the repayments
may be low for properties in this price range, the risk of defaulting is generally higher. Thus, banks
would rather not take the risk for the minimal interest earned.

4. Developer of the Properties

Most banks will do a CTOS (Credit Tip-Off System) check on the developer or seller to make sure that
the company or individual is not under bankruptcy. If the result is unfavourable, you may not be able
to complete the house purchase transaction.
It may be a blessing in disguise for being rejected as this procedure safeguards the bank and also you,
from dealing with incomplete project due to the developers bankruptcy.

5. Location
For certain areas, you may find yourself unable to get a loan for the property due to various reasons.
Some location may have slow movement in appreciation or due to a history of landslide namely
places like Bukit Antarabangsa. Other less favourable areas are places with

low marketability & occupancy

increasing cases of auctions.
Natural disaster area landslide or flood.

6. Maintenance and Upkeep

If you happen to find an affordable property in hot location, dont celebrate yet. There could be a lot
of reasons why property is priced below market value.
Most banks are not willing to approve home loan for old properties (more than 10years) especially if
it is badly maintained and managed. There have been a number of properties in a good location that
buyers find difficult to obtain loan. Bad parking access condo may face difficulties in getting
financing too.

By knowing the above factors that determine loan approval, you will be armed with proper
knowledge to find good value property. Even though you may assume that it is difficult to obtain
loan for certain property, it is still worth giving a shot. The result may be different depending on
each banks policies.

Property Investment In Malaysia

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www.NewPropertyLaunch.my is a platform for you to check out on the latest property

launches in Kuala Lumpur and Selangor. With the aim to provide transparent and detail information
in regards to each launch, investors will have better understanding of the overall projects.
The properties are categorized into price range of:

RM 400,000- RM 600,000
RM 600,000- RM 800,000
RM 800,000 and above

As certain sensitive information such as price per square feet (PSF) and developers rebates may
subject to change, we are not publishing it. For additional information, you may fill up the Enquiry
Form after each project and we will reply within 48 hours.

So Will Property Prices Rise/Drop in the Next Three Years?

(Source from CIMB and UncleZMalaysia)

Property Investment In Malaysia

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BONUS
Bank Loan Submission
1) To determine your income capability to repay the monthly loan commitment, banks will use the
basis of either:

Debt Service Ratio (DSR) Generally 70% of nett income

Tax declaration (form BE/B)

Choose to submit your tax declaration only IF it shows higher income than your DSR calculation.
(Check with your bank on the basis of DSR Calculation as different banks are different)

2) Certain banks like Hong Leong and OCBC will consider High Nett Worth Individual with the
allowance of 150% of nett income for loan commitment. To be considered as High Nett Worth, one
has to prove more than RM1million equity (asset less liability):Assets are:

Property
Cash in bank (Cash in safe deposit not considered)
Fixed deposit (even in other banks)
Stocks

3) One may require Guarantor to obtain the loan. If your guarantor has 2 properties on hand, the
third property will be based on 70% loan margin. This may affect your margin of financing.
However certain banks will consider based on the basis that you are buying for your First or Second
property with 90% margin of financing, ignoring the Guarantor 70% margin.

Conclusion
Thus choosing the right banks to submit your loan documentation is very important. If the first 3
banks have rejected your loan, the fourth (4th) bank will have lesser chance to approve even they are
favorable to your financial capability.

The author thereby wishes that these advices and guideline would help you in your future investment
in properties. Thank you and have a good day.
(VISIT www.newpropertylaunch.my for updated properties launched)

Property Investment In Malaysia

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