Wait! This is IMPORTANT! Read This First Before You Sign the Sale & Purchase Agreement (S&P)!

On 5 June, Prime Minister Tan Sri Muhyiddin Yassin announced that The Government will introduce several incentives to stimulate the property market and provide financial relief to home buyers. (See news link here)

The announcement has excited many that are looking for opportunity buying their first home or first investment property.

But is NOW really a good opportunity to sign up a commitment that will tie you down for 20 to 30 years?

Do you know what are the impacts of interest changes?

Do you have sufficient back- up funds in case losing your job income?

Property can be an asset or a liability.

Consider all the factors carefully before you make the purchase decision.

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Buyer’s Market vs Seller’s Market

We have heard about the relationships between Supply and Demand. Generally, low supply and high demand will increase the price for goods and vice versa.

For the past years, Malaysia’s property price has been on a steady rise. Stable job income, rapid urban development and population growth contributed to the price rising. 

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However, when the world is struck by the Covid-19 pandemic, our economy is severely impacted, the seller's market then switched to the buyer's market.

A buyer’s market refers to a period in the property market that favours those looking to buy a home, rather than those looking to sell it.

The advantage of the buyer's market is that the buyer gets more bargain power and better value (bigger house, better quality finishing, more ideal locations, extra freebies, more features & etc) while save more in money.

Property developers too, tend to build more affordable housing and offer more free gifts to entice buyers during the buyer’s market, example free legal fees, free CCTV, free furniture, low down payment, discounted property price, waives of maintenance fees and free upgrade to smart home technology.

Government Perks for Property

Prime Minister Tan Sri Muhyiddin Yassin announced in June 2020, the Home Ownership Campaigns (HOC) will be reintroduced. Through this campaign, stamp duty exemption will be provided on the transfer of property and loan agreement for the purchase of home between RM300,000 and RM2.5mil. 

In addition, the Government has also announced the Real Property Gains Tax (RPGT) exemption for Malaysians for disposal of up to three properties between June 1, 2020 and Dec 31, 2021. (See news link here)

The lift of RPGT is no doubt good news for both the seller and buyer.

In the past, many house owners looking to let go of their properties to reduce financial burdens, however, they have no alternative but to sell slightly higher to cover the RPGT. 

With the exemption, the sellers now can sell their properties at a lower cost and the buyers get to enjoy the benefits!

Your Financial Spreadsheet

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Yes, we are in the buyer market now.

Yes, the Government has numerous aids for us to purchase the property at a lower cost.

So, does this means we are ready to buy?

Wait, have you calculated your Debt to Asset Ratio (DSR)?

DSR is one of the guidelines Banks use to evaluate if you are qualified for the mortgage. The formula is as simple as total up your monthly commitments and divides it with your nett monthly income.

Find out your estimated monthly instalment here

See the overview of various banks' Effective Lending Rates (ELR) table here

The acceptance of the percentage of DSR varies with banks, ranges between 50% to 70%.

But that is not enough. A recommendation is to test it again with different Effective Lending Rates (ELR).  

During the financial crisis in 1997 and 1998, the base lending rate (BLR) once shot up to 10.63% and 12.13% respectively. (See here). There is no guarantee the same will not happen if the country’s economy is performing poorly consecutively and the banks have to increase their profits to survive.

The financial risk test is not to discourage you from buying, rather, is to encourage you to be more cautious when making a financial decision that will lock you down for 20 to 30 years, time is precious!

So, Buy Now or Later?

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If you have considered all the factors thoroughly, calculated your risk profile and have the confidence to secure stable income for the next 3 years, why wait?

Just remember to ensure you have sufficient back- up funds for the next 6 months in the event of an emergency or any unforeseen circumstances, also, get your income documents ready for loan application.

All the best in finding your dream property!