The question about whether the present is the right time to purchase property is one that is constantly being asked – from aspiring homebuyers to shrewd investors.
Truth be told, the past two years have presented some of the best opportunities to purchase a property in recent decades with record-low interest rates and government incentives such as the Home Ownership Campaign (HOC).
While the HOC may have ended on Dec 31, 2021, other incentives and low interest rates are still in place, which coupled with current market conditions and headwinds expected ahead, make for a window of opportunity to own a property under highly favourable circumstances.
This window of opportunity, however, is slowly closing as the market recovers. While the outlook for 2022 remains cautious, vaccination rates have allowed for the resumption of economic activities despite the surging number of Omicron cases.
Here’s why you should consider purchasing a property within the first half of 2022 if you are financially ready.
1. Future property prices will increase as construction costs increase
The costs of building materials and raw goods such as steel bars, concrete, aluminium and glazing, copper and commercial diesel have seen dramatic price increases due to disruptions in the global supply chain and labour shortages amid the pandemic.
New projects launched in the upcoming years will likely be more expensive as increasing costs trickle down to the homebuyer. This could eventually lead to higher prices in the subsale market when owners try to sell off these properties.
Current projects launched or under construction are unlikely to see price adjustments with cost management, building materials having been purchased at an earlier stage and prices being predetermined.
Hence, homebuyers looking for a property in the primary market may wish to act upon existing offers.
2. Interest rates expected to increase later this year
The pandemic saw Bank Negara Malaysia (BNM) reduce the Overnight Policy Rate (OPR) to a record low of 1.75% in mid-2020.
Early this year, BNM’s monetary policy committee meeting announced OPR rates were to still remain steady at 1.75% as predicted by economists amid fears of the Omicron variant.
However, economists predict upward adjustments which will see interest rates increase later this year as the market recovers.
MIDF Research analysts Syed Kifni Kamaruddin and Abdul Mui’zz Morhalim forecast a 25-basis point rate hike in the second half of the year.
Increases in interest rates obviously mean slightly higher monthly instalments in the home loan for future homebuyers and investors. Buyers who secure a property now at fixed-rate mortgage have the most to gain.
3. RPGT exemption from sixth year onwards and other incentives
In Budget 2022, the government announced the abolishment of the Real Estate Property Gains Tax (RPGT) from the sixth year onwards for the sale of property.
This will be helpful for sellers or homeowners looking to make an upgrade although this pales in comparison to the RPGT exemption previously under PENJANA 2020 for properties sold between June 1, 2020 and Dec 31, 2021.
First Home Buyers (FHBs) are also able to secure up to 110% financing for residential property below RM500,000 via Skim Rumah Pertamaku provided they meet the eligibility criteria.
Additionally, FHBs are able to enjoy stamp duty exemption (until Dec 31, 2025) for residential properties priced below RM500,000.
Government staff may also enjoy a 100% home loan depending on their salary scale via LLPSA financing.
4. End of moratorium may see desperate sellers
The second iteration of the loan moratorium ended in January so many homeowners were required to resume paying their monthly mortgage this month.
The moratorium provided temporary relief for homeowners amid the pandemic and its end will see distressed sellers in the subsale market face increasing financial pressure to dispose of their property urgently.
This presents an opportunity for homebuyers to grab properties in the secondary market at a bargain.
Alternatively, experienced investors may hunt for good deals in the auction market which could also see an uptick with the end of the moratorium.
Once the market recovers, homebuyers can expect to see less incentives being rolled out alongside less favourable market conditions.
Hence, prospective buyers should strike while the iron is hot but be mindful of the financial commitments that come with owning a property.
This article was written by Vigneswar Rajasurian of PropertyAdvisor.my, Malaysia’s most comprehensive source of property data, property analytics and insights.