Should you purchase a property now?

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Contrary to what people may think, the property sector is surprisingly resilient. This is largely due to the fact that having a roof over our heads is not a want, but a basic necessity. Other than that, there are also a number of bargain hunters and investors looking to hunt for a good deal. 

This would explain why the overhang of residential units decreased in volume in 2020, down by 3.6% compared to 2019, based on NAPIC’S Property Report 2020. Having said that, with the surge of Covid-19 cases and ensuing lockdowns, is it a good time for you to purchase a home?  

The government is playing their role in trying to keep the property market alive by further extending the Home Ownership Campaign (HOC). Originally introduced in 2019, it was first extended in June 2020 under the PENJANA initiative and was supposed to end on 31st May 2021. However, it was once again extended until the end of the year in the Prime Minister’s Pemerkasa Plus announcement.   

Under the HOC, homebuyers are entitled a minimum 10% discount on the purchasing prices of selected projects listed under the scheme. Besides that, they will also enjoy exemptions not only on stamp duty, but also on instruments of transfer. That makes it at least 5 digits worth of savings!  

The HOC is not the only government incentive aimed at boosting homeownership. Under Budget 2021, first time home buyers (FHB) will enjoy full stamp exemption until 2025, which means that subsale properties are also included, unlike the HOC which only caters for new projects.  

Additionally, Bank Negara Malaysia’s Overnight Policy Rate remains at 1.75%, which is the lowest it has ever been. Simply put, the lower OPR triggers local banks to reduce their base lending rate (BLR) and base financing rate (BFR). Consumers can then enjoy lower interest rates and in turn, lower monthly instalments. Some banks such as Alliance Bank are even offering home loans for as low as 2.9%. This is a huge contrast to the average house loan interest rate of 3.8% that we recently calculated based on the loans offered by 23 banks (based from Ringgitplus on 16th July 2021).  

Coupled with the fact that some developers are lowering their purchase prices in order to lessen their inventory, this would be a good time for FHB or upgraders to finally purchase their dream home. However, some developers may include attractive rebates and freebies that sound too good to be true – so it is always a wise idea to check the actual value of the property to ensure that the prices have not been marked up. A good place to check is at the Property Advisor portal, propertyadvisor.my where you can find actual transactions of similar properties in the area.  

PropertyGuru’s Malaysia Property Market Index for Q2 2021 revealed that overall median asking prices have dropped by 0.84% QoQ, a result of recent Covid-19 case spikes and ongoing pandemic related economic uncertainty. Local research house, Kenanga, also reported that although housing prices have soared internationally in the past year, Malaysia’s housing market is not expected to follow suit due to our relatively slower recovery from Covid-19 and existing oversupply of houses.  

In a buyer’s market, the negotiation power lies with the buyer, whereby it is possible to purchase a house below market rate. In tandem with lower monthly commitments – a benefit of a lower interest rate, a buyer can not only save money by purchasing now, but also enjoy a higher capital gain in the long run.  

This means that for those with a healthy Debt Service Ratio and remain financially stable with extra savings at hand, it is actually the most ideal situation to begin house hunting, especially with the high possibly of getting lower interest rates.  

Before beginning the house hunting though, find out which bank gives you the best interest rates as well to give yourself even more savings. You can also get the banks to advise you on your monthly instalments so you can sit down and calculate your monthly expenses, to ensure you can afford to keep up with the monthly home loan instalments should you decide to purchase a home. A good place to get started is at Alliance Bank, where you can not only check your loan eligibility, but also how much you can save on monthly payments if you purchase a home now.  

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