Should you buy new landed or non-landed property?

images

Let’s begin by looking at the current situation.

The property market has undergone great changes in terms of demand and supply plus the affordability issues.  Because of the current over supply issues , developers are now offering good packages for easy entry cost for buyers:

– No down payment
– Cash back
– Free legal fees, stamp duties on loan agreements. Some even absorb the MOT (Memorandum of Transfer) stamp duty

Because of this, owners in the secondary market who want to sell their property (secondary market) cannot compete with developers for buyers.

As most buyers cannot afford to fork out cash for the down payment required (10% of the purchase price) plus the legal fees and relatively high stamp duties, they prefer to buy from developers even though the properties are more expensive than the secondary market.

Demand and Supply

Developers nowadays mostly build non-landed properties (condos, apartments) as land is very expensive, especially near the town areas. This creates an over supply situation. A lot of developers cannot finish selling their units even after more than a year after completion. Many buyers of such units are now stuck as they cannot sell their new condos even at cost price as developers, with their incentives have not finish selling theirs. Because of grossly over supply in this segment, there is no resale value for non-landed property.

Over supply also means poor rental rates and the inability of owners to service their loan installments.

This does not mean you should not buy non-landed properties. You can still buy: in locations sought after by people even though they are more expensive e.g. lots of amenities, near MRT stations/commercial offices, low density types etc.
where they can easily be rented out with good rates or those around the RM300,000 category price range as the market for this segment is big and affordable

Landed property

People always prefer to stay in landed properties. Bigger space, can do a bit of gardening, wash their cars, no need to wait for lifts or pay maintenance fees.

Despite the demand, the supply of such new properties coming into the market are limited. Therefore, landed property has good potential for future capital appreciation.

Due to the limited supply, it is no brainer to buy landed properties even though they are more expensive than non-landed property, provided you can afford them.

Conclusion

A lot of condo owners in the higher price segment are now bleeding money (low rental rates) and they cannot get buyers even selling below purchase price. Landed property is still in safe territory except for those in the million dollar range.