Purchasing a property in your twenties

This article first appeared in City & Country, The Edge Malaysia Weekly, on February 13, 2017 - February 19, 2017.

Lim: Be realistic and flexible in the requirements when purchasing a property. Photo by Kenny Yap

Lee: Anytime is a good time to buy because it should be long term. Photo by Shahrin Yahya

Adzman: Buy a property you can afford to pay for. Photo by Kenny Yap

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You would be surprised how many potential young property buyers assume that purchasing a property is straightforward.

It is definitely not as simple as you might think to get on the property ladder. Buying a property, especially on the secondary market, comes at a huge cost and involves a long and quite complicated process.  

Anette, 25, was shocked and surprised to learn about the process and the charges involved.

“I thought I would only have to pay RM500,000 and that’s it. I honestly had no idea there are so many additional charges and that the process is so complicated,” she says.

Megan, 26, says that she finally understands why it is tough to finance a house by yourself.

“Looking at my income, it is next to impossible to purchase a house. Some of my friends tied the knot early just so they could buy a house together,” she says.

Taking into consideration the all-important affordability factor and speaking to some property experts, we try to shed some light for young people looking to own a property.

 

The ‘where’ and the ‘what’

City & Country conducted a survey recently of young working adults aged from 22 to 32. There were 90 respondents, most of whom do not own a property yet but are looking at buying one soon. They would like to own a condominium, apartment, serviced apartment or terraced house in Petaling Jaya, Kuala Lumpur or Shah Alam. On average, they had a monthly income of RM4,000.

Asked what is their affordable range, the majority said it was between RM300,000 and RM500,000. We also asked if their parents would be helping them to buy a property and most said no.

Based on the above criteria, is it better to pick a property on the primary or secondary market? The experts’ advice is to look at the non-landed secondary market unless you want to live in a shoebox unit.

ExaStrata Solutions Sdn Bhd chief of real estate Adzman Shah Mohd Ariffin says if potential buyers spend more time doing research, they would be able to find reasonably priced properties in older schemes on the outskirts.

Reapfield Properties Sdn Bhd group COO Jonathan Lee and Hartamas Real Estate (Malaysia) Sdn Bhd group managing director Eric Lim say it is very hard to get properties in this price range on the primary market.

“If you are looking at the outskirts or fringes of these places, then maybe you could still find some developments in that price range. But it would be mostly non-landed properties. Also, you would be looking at affordable homes in government schemes. It is difficult to purchase private housing in that price range unless it is a shoebox unit,” says Lee.

“The differentiating factor may be the size of the units, where better locations offer smaller units to maintain affordable prices. Terraced houses are extremely rare at such prices,” says Lim.

 

What is available on the secondary market?

Based on the comments from property experts and the survey results, we did a quick search online on iProperty.com and theedgeproperty.com for a few non-landed properties on the secondary market in the targeted areas, priced from RM350,000 to RM400,000. The examples are shown on the map.

Located in the middle of Shah Alam, the Azalea SoHo unit has a built-up of 775 sq ft (1 bedroom, 2 bathrooms) while the Vista Alam serviced apartment is 714 sq ft (2 bedrooms, 2 bathrooms), on sale at the same price of RM400,000.

The Alam Sanjung serviced apartment has a bigger built up of 864 sq ft (3 bedrooms, 1 bathroom). Located on the fringe of Shah Alam, it is going for a lower price of RM380,000. On the other side is Hyde Tower @ I-City with a built-up of 465 sq ft, with a selling price of RM375,000.

Priced at RM390,000, the Palm Spring @ Damansara condominium has a built-up of 926 sq ft (3 bedrooms, 2 bathrooms) and is located close to 1 Utama Shopping Centre.

Located further south are Oasis Square serviced apartment, Prima Avenue SoHo and Centrestage Designer Suite condominiums, with built-ups of 572 sq ft (1 bedroom, 1 bathroom), 603 sq ft (1 bedroom,

1 bathroom) and 452 sq ft (studio, 1 bathroom) respectively. Oasis Square and Centrestage Designer Suite are priced at RM400,000 while Prima Avenue is selling for RM350,000.

In north Kuala Lumpur, units in MH Platinum Residences condominium in Wangsa Maju and East Parc @ Menjalara serviced apartment in Bandar Menjalara have built-ups of 682 sq ft

(2 bedrooms, 1 bathroom) and 600 sq ft (1 bedroom, 1 bathroom) respectively. East Parc is on the market for RM371,000 while MH Platinum has an asking price of RM360,000.

Vista Amani condominium in Cheras and Parklane OUG condominium, near Old Klang Road, are in the south of Kuala Lumpur, with built-ups of 1,100 sq ft (4 bedrooms, 2 bathrooms) and

950 sq ft (3 bedrooms, 2 bathrooms) respectively. Vista Amani has an asking price of RM400,000 while Parklane OUG is for sale at RM370,000.

Evidently, there are many units available on the secondary market. It all depends on what one is looking for and is willing to pay. Location, of course, is a major factor for most of us. Affordability is key. The question is, are we getting too fussy or are we not being realistic about what we can or cannot afford?

 

Is now the right time to buy a property?

When asked about purchasing a property priced from RM300,000 to RM500,000 on a monthly salary of RM4,000, property experts say it is possible, provided the buyer has a healthy savings habit.

“One major point to note is to be realistic and flexible in the requirements. Searching for properties with a clear understanding of the parameters of their affordability can spring some pleasant surprises,” says Lim.

“Buy a property you can afford to pay for. Other than that, always keep your financial record clean by paying promptly and lowering your existing financial commitments. It will allow for extra cash for loan repayments,” says Adzman.

 

Economic forecast for Malaysia this year is quite bleak

Lee says any time is a good time to buy. He quotes  Warren Buffett: “when everyone is fearful, be greedy. When everyone is greedy, be fearful”.

“When the economy is down and everyone is out of the market, there are more options and less pressure. The prices are low too. When the economy goes up, the situation is the opposite.

“I think anytime is a good time to buy because it should be long term. But whatever it is, property is a form of savings and accumulation. Even though there is some liability involved, it is still quite safe. Holding an asset would be a better choice than holding cash as the latter will depreciate,” Lee says.

In the primary market, says Lim, buyers have a wide selection of attractive packages from developers who offer innovative structuring schemes to address financing limitations.

Many owners in the secondary market will be more flexible in negotiations and ready to meet buyers’ requests, he adds.

Additionally, there are many incentives and schemes from the government for first time homebuyers.

 

The Asian mindset

There is always the option of renting but in Malaysia, young people are in a hurry to buy a property, even if it is situated far away from the city centre.

This is in stark contrast to some in the West, who are content to rent a house for the long term.

The mindset of Asians is that it is better to own a property, especially a house, says Lee.

After gaining financial independence, the ultimate target of young working adults is to purchase a home, be it non-landed or landed.

“Culturally, in the Asian or Chinese context, being complete is to have a family and a home. The Mandarin word ‘house’ or ‘home’ is not just about having a family — it is about everything. A family without a home is not complete. You can see from the Mandarin character,  it is having a roof over your head,” says Lee.

Lim concurs, saying that it is an important rite of passage for many and part of the process of gaining independence upon entering the workforce as well as an indication of one’s ability to provide security for one’s future family.

On the benefits of renting a property, Lee mentions flexibility and experience.

“Renting a property means less liability. Most importantly, young people today want to go through the experience. They want to rent a place so that they can try it out and see if the experience is good or not. If the experience is not good, they can pack up and leave anytime.

“Even though you tell them that buying a house incurs less expenses and is more logical, they would not care because they want the experience,” Lee says.

Lim agrees, saying that renting overseas can be as expensive as purchasing a property.

“Established metropolises like New York or London have very low vacancy rates, which inevitably push up rental rates,” he says.

 

Final words of advice

“The idea is to look for reasonably priced developments that are well-managed and have good rental rates. Proximity to amenities and efficient public transport is a must, so they are sought after,” says ExaStrata Solutions’ Adzman.

Lim says the guiding principle in purchasing a property is to always buy within one’s means and comfort level and always ensure sufficient analysis has been done.

“There are many online tools that provide information to assist in making good purchase decisions,” he says.

Lee stresses commitment and adding value to one’s job and company, being realistic and knowing the game plan.

“Young people should create value for the company they work in so it will create value for them. When they have value, they become an asset and then they will get higher pay. It is an illusion if they think they can do more for the company without putting in the commitment. They have to be realistic, put in the effort and be willing to go through the struggles.

“It is also important to have a game plan  when they want to buy a property. Be it for home stay or investment, they have to think about the long-term plan. Do not buy things for short-term profit. Look at a 5 to 10-year horizon,” he says.

Another factor to consider is comfort. Hazel, 32, says of her experience in buying a property on the secondary market.

“If you don’t feel comfortable when you view the property, then don’t buy it. I am talking about personal preference and not superstitions such as ghosts and whatnot. For example, I like natural lighting and I won’t settle for anything less.

“Comfort is a very general term and different people have different preferences. Wanting comfort is one thing and being fussy is another — as a Chinese idiom puts it, ‘picking a bone from inside an egg’. That is being fussy,” she says.

“Never buy a property for the sake of buying it. Just because other people say it is a good buy doesn’t mean you have to buy it.

“One of the perks of buying a property on the secondary market is that you can see how well the place is maintained by the management. I think that is very important because I don’t want to pay the maintenance fees for nothing.”

So, is there hope? Will we ever be able to afford a property in the location we really want? As Reapfield’s Lee says, work hard and create value for yourself. As your value increases, the financial means to get your heart’s desire will follow.

Having said all that, 38-year-old May says she wishes she had started investing in property earlier. “I bought my first property three years ago and while signing the sales and purchase agreement I felt like I was signing my life away. It wasn’t as daunting as I had anticipated but there were some surprises in terms of hidden costs. Perhaps because I bought my condo off the plan, some costs were waived by the developer. I am looking at my third property now.” Her advice to potential homebuyers? Buy now but choose the right location and the right developer.