Buying property is no stroll in the park

What do people consider when purchasing a home or investing in a property? Normal people have to rely on professional advice, since this is not something they do often; and the things they have to consider are numerous, and many are place-specific.

Penang is in a property boom at the moment with a record number of development projects being found on both the island and the mainland. This trend will most likely continue into the foreseeable future, and a tight supply of completing properties and an increase in population is expected over the next few years.

It also helps that Malaysia is one of the few countries that allow non-citizens to purchase property outright, be it freehold or leasehold. Investors also have a choice of buying either a landed or stratified property, and directly from developers or in the sub-sale market.

A stratified property can be either landed, e.g. a semi detached or terrace house developed in a gated environment, or a condominium development, and the owners will have to pay monthly maintenance fees. For landed property, the buyer is issued a final title where no contributions are necessary to any management body save to the council for yearly assessment rates and quit rent.

While buying property is relatively easy in Penang, the issues to be considered are numerous. For starters, when choosing a place, buyers would consider the following:
• The location
• The price
• The developer’s past performance
• The unit density — often measured as units per acre
• The concept involved — sell and build or build and sell (Sell and build is when the developer sells the units first before actually going ahead with the development. Build and sell is the opposite)
• The land tenure — freehold or leasehold
• The history of the land, whether reclaimed or not, etc.
• The design — family-orientated or not, green features or not, etc.
• The landscaping — eco-friendly or not
• Open space — by law, a minimum 10% of total land area for open space is required
• Security issues
• The management

Investors purchasing completed units from the sub-sale market would prefer to deal with a licensed real estate company or agent, often after checking with the Board of Valuers, Estate Agents and Appraisers (www.lppeh.gov.my) or the Malaysian Institute of Estate Agents (www.miea.com.my). When dealing with agents, they would also consider the following:
1) Acquiring an offer letter from the agent to ensure that all agreed terms are stated
2) Appointing a lawyer to handle the sales and purchase transaction
3) Checking tax positions, e.g. the Real Property Gains Tax

They would also be well advised to keep themselves updated on the latest government guidelines for buying a property in Penang. State consent is required for non-Malaysians buying and for landed property. The current rules are: Non-Malaysians can only buy property if the property is priced at more than RM2mil for the island and RM1mil for the mainland. In addition, those under the Malaysia My Second Home (MM2H) programme are limited to buying only two properties, and they have to be valued above RM500,000.

Apart from the purchase price, there are numerous other costs a buyer must bear:
1) Legal fees for the Sales and Purchase Agreement, plus disbursements
2) Legal fees for loan document preparation (if a loan is necessary)
3) Registration fees
4) Stamp duty — if it is a landed property, payment must be made immediately along with the aforementioned legal fees. For stratified property, stamp duty is deferred till the strata title is issued
5) Monthly maintenance charges — advance payments upon taking possession plus monthly payments for stratified property

Needless to say, investing in property is a major decision for many people, especially when one is new to the place. Some MM2H participants have the impression that they are obliged to buy property. This is not the case. Many actually rent a place first to get a feel of the area they are living in before deciding to invest in property.

Furthermore, property as an asset is not easy to cash out on. Apart from the cyclical nature of property and geographic location, there are several other factors important to identify where Penang investments are concerned:
1) Is the demographic growth strong? Anticipated returns are always dependent on economic growth, which in turn is dependent on a growing population.
2) Are the country’s economic prospects good? Most people investing in say, Penang, do so because of its ties to developments in the country as a whole.
3) Does the area have a growing retirement population? If it does, then there is probably close proximity to good hospitals, banks, etc.
4) Is the infrastructure effective and visibly improving?

Though technically simple, purchasing a property is no stroll in the park.

Mark Saw is an executive director of PPC International and heads its Penang office. He is a fellow of the Royal Institution of Surveyors, Malaysia and member of the Royal Institution of Chartered Surveyors, UK.



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