Is Now The Best Time To Buy Or Sell Your Property?
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It goes without saying that if you are thinking of selling your house now, prices may not be at their most favourable.
On the other hand, if you are looking to invest in property, you have the advantage in the buyer’s market now.
Either way, there are steps you can take to prepare you to make the best financial move when the opportunity appears for both sellers and buyers now.
Key facts about the property market right now
First, let’s look at the situation on the ground.
Did you know that asking prices for properties in certain areas in Malaysia actually increased in the second quarter of this year? The Malaysia Property Market Index 2020 showed that prices in 2020 increased slightly for Selangor and Kuala Lumpur as the supply of new property in the market dropped sharply during the Movement Control Order (MCO). This should be good news for those looking to sell their property and wondering if prices are just too low to make the move.
Meanwhile, let’s not forget what was happening even before the pandemic hit and the MCO shut down all construction activity. By the end of last year, the number of unsold completed residential properties had soared above 45,000 units valued at over RM30 billion. According to the National Property Information Centre (Napic), the supply overhang has been growing in the last four years. This has created the current buyers’ market condition where those looking to invest in properties have the advantage.
Additionally, the recent announcement by the government to launch the PENJANA Economic Recovery Plan also included the revival of the Home Ownership Campaign (HOC) with incentives for both sellers and buyers.
Given these market conditions, here’s what you need to consider as a buyer or seller now.
Things to consider for property buyers
Whether you plan to buy now or next year, experts predict that it’s going to be a buyers’ market for the next few years so don’t pass up this advantage to get a better deal.
Here are the key facts for buyers:
1. Enjoy lower interest rate for your home loan
The 2% Overnight Policy Rate (OPR) is the lowest now since 2010. This low bank lending rate is a big advantage if you are looking to take out a home loan to buy a property now as it could reduce your monthly loan repayments by over RM1,000 or more for bigger loan amounts.
2. Pay lower or no stamp duty fees to buy a new property
This applies for buyers of properties priced between RM300,000 to RM2.5 million with the fee exemption applicable to the first RM1 million. However, the property developer must offer a 10% discount on selling prices to qualify under the HOC campaign. This exemption is available until May 2021.
Here’s how much you can save in stamp duty expenses if you plan to buy a RM500,000 property with a RM50,000 down payment.
| Property price RM500,000 | Stamp duty amount | |
|---|---|---|
| Stamp duty for the transfer of ownership title | · 1% for the first RM100,000 · 2% on the next RM400,000 · 3% on additional amounts above | RM9,000 |
| Stamp duty for RM450,000 loan amount | 0.5% of loan amount | RM2,250 |
| Total savings on stamp duty | RM11,250 |
3. Up to 90% of financing limit beyond second property, which are priced above RM600,000
Buyers can now get a loan for up to 90% of the purchase price for properties priced above RM600,000. Previously, property buyers were limited to 70% financing for their third property onwards. This makes a huge difference in the upfront cash you need to fork out.
4. Keep track of your credit score
Banks will be more cautious in approving loans now for certain employment sectors badly affected by Covid-19 so you should keep a good credit score to increase your chances of getting your loan approved.
Your decision as a buyer should also take into account whether you are buying it as your home or as a property investment. They are very different reasons and will impact whether the financial considerations to make when buying a property are worth it.
So, the best time to buy is when you are financially ready to make that move regardless of how the property market is performing.
Things to consider for property sellers
In a buyers’ market situation right now, many property owners may adopt a wait-and-see attitude and not sell their houses at current prices. However, holding on to a property investment comes with its own costs as well.
Here are the key facts for buyers:
1. Cost savings from Real Property Gains Tax (RPGT)
Buyers can save on paying RPGT for up to 3 property sales from now until December 2021 so this might allow more room to negotiate a price with potential buyers.
Here’s how much can you save on RPGT for a property priced at RM500,000 today which was previously bought at RM400,000.
| Property selling price | RM500,000 | ||
| Property purchase price | RM400,000 | ||
| Chargeable gain | RM500,000 – RM400,000 = RM100,000 | ||
| Exemption waiver* allowed: RM10,000 or 10% of chargeable gain | RM10,000 | ||
| Total amount subject to RPGT | RM100,000 – RM10,000 = RM90.000 | ||
| Sale in Year 1 to 3 | Sale in Year 4 | Sale in Year 7 | |
| RPGT rate depends on holding period | 30% x RM90,000 | 20% x RM90,000 | 5% x RM90,000 |
| Total RPGT amount you save | RM27,000 | RM18,000 | RM4,500 |
*There are other types of RPGT reliefs that you can take advantage of if you qualify
2. Loan moratorium ending in September 2020 might see a sudden increase in properties for sale
Although the government has announced various measures to stimulate the economy, the road to recovery may take some time, and it depends on each individual as well.
Property owners affected by the pandemic may find themselves unable to afford their home mortgages once the bank starts demanding payments for the loans. Bank Negara Malaysia (BNM) is already projecting that non-performing loans (NPL) will rise once the loan moratorium ends. Sellers may be faced with stiffer competition as more properties become available for buyers to pick and choose.
3. Enjoy lower interest rate for your home loan
On the other hand, existing property owners with home loans will also see a reduction in their monthly home loan repayments from the recent OPR cuts.
For example, if you have an existing home loan with an interest rate of 4.30%, a 0.50% OPR rate cut will see your interest rate reduced to 3.80%. So, you can expect to pay several hundred ringgit less in monthly mortgage payments which can amount to over RM50,000 or more in savings when you finish paying the loan.
| Loan amount | RM500,000 | |
| Loan tenure | 30 years | |
| Home loan interest rate | 4.30% | 3.80% |
| Monthly repayment | RM2,474.36 | RM2,329.79 |
| Total interest paid over 30 years | RM390,768.60 | RM338,723.23 |
Source: https://www.imoney.my/articles/opr-cut-by-0-25-how-will-it-affect-you
You should consider this potential cost-savings in your decision to sell or hold on to your property in the current market conditions.
While the government is pulling out all stops to get the economy back on track as soon as possible, the property sector may have a long wait ahead.
A recent survey of property investors behaviour revealed that 70% of the survey respondents put price as their main consideration when deciding whether to buy a property post-MCO.
Ultimately, it comes down to the price for both buyers and sellers. Would you buy or sell your house now?
