Will You Buy Or Sell Your House?

It goes without saying that if you are thinking of selling your house now, the prices may not be the best.

On the other hand, if you are looking to invest in real estate, you now have the advantage in the buyer’s market.

Either way, there are steps you can take to prepare yourself to make the best financial move when the opportunity arises for sellers and buyers now.

Key facts about the real estate market right now

Let us first look at the situation on the ground.

Did you know that the asking prices for properties in certain parts of Malaysia actually increased in the second quarter of this year? The Malaysia 2020 property market index showed that prices in 2020 increased slightly for Selangor and Kuala Lumpur, as the supply of new properties in the market fell sharply during the movement control order (MCO) . This should be good news for those looking to sell their property and wonder if prices are just too low to take the step.

In the meantime, let’s not forget what was happening before the pandemic hit and the MCO shut down all construction activities. By the end of last year, the number of unsold completed residential properties had exceeded 45,000 units valued at more than RM 30 billion. According to the National Property Information Center (Napic), excess supply has increased in the past four years. This has created the current buyer market situation where those looking to invest in properties have the advantage.

In addition, the recent government announcement to launch PENJANA’s economic recovery plan also included the relaunch of the Home Ownership Campaign (HOC) with incentives for sellers and buyers.

Given these market conditions, here is what you should 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 will be a buyer’s market for the next few years, so don’t lose that advantage to get a better deal.

Here are the key facts for buyers:

1. Take advantage of a lower interest rate on your home loan

The key rate of 2% (OPR) is the lowest since 2010. This low bank loan rate is a big advantage if you are looking to take out a mortgage to buy a property now, as it could reduce your monthly loan repayments. more than RM1,000 or more for larger loan amounts.

2. Pay lower stamp duties or no fees to buy a new property

This applies to buyers of properties whose price is between 300,000 and 2.5 million RM, the exemption from fees applying to the first million RM. However, the property developer must offer a 10% discount on the sale prices to be eligible for the HOC campaign. This exemption is valid until May 2021.

Here’s how much you can save on stamp costs if you plan to buy an RM500,000 property with an RM50,000 down payment.

Price of property RM500,000Stamp duty amount
Stamp duty for the transfer of ownership· 1% for the first RM100,000
· 2% on the next 400,000 RM
· 3% on the above additional amounts
RM9,000
Stamp duty for the loan amount of RM 450,0000.5% of the loan amountRM2,250
Total savings on stamp dutyRM11,250

3. Up to 90% of the financing limit beyond the second property, the price of which exceeds RM 600,000

Buyers can now obtain a loan of up to 90% of the purchase price of properties priced above RM 600,000. Previously, property buyers were limited to 70% of the financing of their third property. It makes a huge difference in the cash you have to shell out.

4. Keep track of your credit score

Banks will be more careful in approving loans now for certain job sectors severely affected by Covid-19, so you need to maintain a good credit rating to increase your chances of getting approved for your loan.

Get your free iMoney CreditScore now to see how you are doing with your current loans, and if you are financially healthy for the banks to approve more credit products for you.

Your decision as a buyer must also take into account whether you buy it as a house or as a real estate investment. These are very different reasons and will have an impact if the financial considerations to be taken when buying a property are worth it.

So the best time to buy is when you are financially ready to make this move, regardless of the performance of the real estate market.

Things to Consider for Property Sellers

In a buyer’s market situation right now, many homeowners may adopt a wait-and-see attitude and not sell their homes at current prices. However, keeping a property investment also comes with its own costs.

Here are the key facts for buyers:

1. Savings made through the real estate gains tax (RPGT)

Buyers can save on RPGT payment for up to 3 property sales by December 2021, which could leave more room to negotiate a price with potential buyers.

Here’s how much you can save on RPGT for a property priced at RM500,000 today that was previously purchased at RM400,000.

Sale price of the propertyRM500,000
Real estate purchase priceRM400,000
Imputable gainRM500,000 – RM400,000 = RM100,000
Exemption from exemption * authorized:
10,000 RM or 10% of attributable gain
RM10,000
Total amount subject to the RPGT100,000 RM – 10,000 RM = 90,000 RM
Sale from year 1 to 3Sale year 4Sale year 7
The RPGT rate depends on the holding period30% x 90,000 RM20% x 90,000 RM5% x 90,000 RM
Total amount of PSTN you save RM27,000RM18,000RM4,500

* There are other types of RPGT relief available to you if you qualify

2. Mortgage moratorium ending in September 2020 could lead to sudden increase in properties for sale

Although the government has announced various measures to stimulate the economy, the road to recovery may take a while and it also depends on each individual.

Landowners affected by the pandemic may be unable to pay their mortgages once the bank has started to demand payment of the loans. Bank Negara Malaysia (BNM) already predicts that non-performing loans (NPL) will increase once the moratorium on loans ends. Sellers may face more intense competition as more properties become available to buyers.

3. Take advantage of a lower interest rate on your home loan

On the flip side, existing homeowners who have home loans will also see a reduction in their monthly home loan repayments compared to recent reductions in the PTR.

For example, if you have an existing home loan with an interest rate of 4.30%, lowering the OPR rate by 0.50% 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 represent more than RM 50,000 or more in savings when you finish paying the loan.

Amount of the loanRM500,000
term of the loan30 years
Mortgage interest rate4.30%3.80%
Monthly reimbursementRM2,474.36RM2 329.79
Total interest paid over 30 yearsRM390,768.60RM338,723.23

Source: https://www.imoney.my/articles/opr-cut-by-0-25-how-will-it-affect-you

You should consider these potential savings in your decision to sell or keep your property under current market conditions.

As the government makes every effort to get the economy back on track as soon as possible, the real estate sector may have a long wait ahead of it.

A recent survey on the behavior of real estate investors revealed that 70% of survey respondents placed the price at the center of their concerns when they decide to buy a property after the MCO.

Ultimately, this comes down to the price for buyers and sellers. Would you buy or sell your home now?

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Jothi Venkat

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