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 Headache choosing property

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TSGadget_Freak
post Jul 22 2008, 01:06 AM, updated 16y ago

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Hi there. Sorry for the long post.

My fiancee and I plan to buy our 1st property in Penang. It is extremely hard to choose property in Penang island compare to KL as we are not very rich.

After minus all the current expenses, insurances, car loan, etc., Our max savings only RM2k (include RM350 for both our current rental).

So now, i aiming an apartment/condo at pg island as i know definitely i couldn't afford a landed, even landed in mainland now is not cheap + increase car petrol and tol for long travel.

Ok, after survey and non stop viewng house for the past 1 month++, i notice that it is either buy the very cheap apartment/condo or the more expensive one.

Why do i said that? The current apartment that i'm staying, the market value is around RM110k and around 750sf. The demand here is very bad and the value looks like stagnant.

Those apartment/condo that cost around RM150-180k not much better too, slightly bigger if not same size and offer the same amount of facilities, perhaps some of them are better location but their appreciation value is quite stagnant too, demand are less and a lot ppl selling.

For those that are high in demand and good in appreciation value, most of them cost more than 240k.
There are exceptional case for those 180k-190k apartment which are nice to stay and high in demand, but the number of this kind of apartments are not much and not easy to find also.

After i calculate, i able to buy the exceptional case (the 180k-190k) units but my savings left will not much, and afraid when recession hit, it will hard for me. And even harder for me to get those 240k with no savings at all (only if i get incremented).

So my point is should i buy the very cheap apartment, which cost around 100k-120k (700-800sf and not very good in demand) or should i wait and get those exceptional units (180k-190k) but my savings will be very less or should i save more cash to get the higher end 1 (dun think my increment can chase the appreciation rate)?

Thanks for viewing and hope not too hard to understand biggrin.gif
dreamer101
post Jul 22 2008, 02:30 AM

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QUOTE(Gadget_Freak @ Jul 22 2008, 01:06 AM)
Hi there. Sorry for the long post.

My fiancee and I plan to buy our 1st property in Penang. It is extremely hard to choose property in Penang island compare to KL as we are not very rich.

After minus all the current expenses, insurances, car loan, etc., Our max savings only RM2k (include RM350 for both our current rental).

So now, i aiming an apartment/condo at pg island as i know definitely i couldn't afford a landed, even landed in mainland now is not cheap + increase car petrol and tol for long travel.

Ok, after survey and non stop viewng house for the past 1 month++, i notice that it is either buy the very cheap apartment/condo or the more expensive one.

Why do i said that? The current apartment that i'm staying, the market value is around RM110k and around 750sf. The demand here is very bad and the value looks like stagnant.

Those apartment/condo that cost around RM150-180k not much better too, slightly bigger if not same size and offer the same amount of facilities, perhaps some of them are better location but their appreciation value is quite stagnant too, demand are less and a lot ppl selling.

For those that are high in demand and good in appreciation value, most of them cost more than 240k.
There are exceptional case for those 180k-190k apartment which are nice to stay and high in demand, but the number of this kind of apartments are not much and not easy to find also.

After i calculate, i able to buy the exceptional case (the 180k-190k) units but my savings left will not much, and afraid when recession hit, it will hard for me. And even harder for me to get those 240k with no savings at all (only if i get incremented).

So my point is should i buy the very cheap apartment, which cost around 100k-120k (700-800sf and not very good in demand) or should i wait and get those exceptional units (180k-190k) but my savings will be very less or should i save more cash to get the higher end 1 (dun think my increment can chase the appreciation rate)?

Thanks for viewing and hope not too hard to understand biggrin.gif
*
Gadget_Freak,

Do not buy. Rent. What makes you think it is worthwhile to buy to begin with? Your rent is so low that it may not be worthwhile to buy to begin with.

Dreamer
TSGadget_Freak
post Jul 22 2008, 08:25 AM

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Hi Dreamer,

Then when should i buy in your opinion? During recession? When I'm getting married?

Or should i buy the lower value property that my current rental able to cover?

And for the rental, my landlord didn't increase my rental in these 3 years but not sure in the future.

Thanks

This post has been edited by Gadget_Freak: Jul 22 2008, 08:26 AM
syaq444
post Jul 22 2008, 08:55 AM

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Headache dun buy lor..
Dragnaut
post Jul 22 2008, 09:30 AM

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Hi Gadget_Freak,

I know how you feel. I'm now looking for property in Penang as well. Although my budget is not as tight up as you, but the problem and uncertainty on the economy is the same.

Which area are you looking at? For myself I am looking at Bayan Lepas area.

To help deciding the price of the appartment to buy, my advice is that you should first check out which loan to take and calculate the installment base on 1 person basis. By saying that your installment should be about 50% of your 2k saving add up from both of you -- so that should be 1k. Hence I will advice you not take up any loan more than 150k (assume 30 years loan). To further secure yourself I will also advice you to take up fixed loan. Current fix loan is about 6%, you can check out Maybank (5 years fix loan, subsequently BLR-1.8%); AIA and ING offer whole tenure fixed loan.

Regarding the appreciation value -- I think it's very hard for non-landed property to appreciate now. It's either stagnant or most likely will drop during bad time. From my PoV Luxury condos are more vulnerable to price drop if recession hits. I am targeting landed, hoping it will not drop that much during recession. But after some discussion with friends, I think even landed might be on medium risks as well especially supply of property in Penang island now is more than demand (just go around and check out how many household lights up at 9PM and you can roughly guess the occupancy). During 90s Asia economy crisis some Singapore landed and apartment value dropped by almost 40%. Even until now the value still not recovered back to its peak value. At that time Penang was not impacted much but the situation now is that there are more foreign investors invested in Penang property so I afraid to say that the bubble may burst this time, even for landed...

Just my 2 cents smile.gif
dreamer101
post Jul 22 2008, 09:51 AM

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QUOTE(Gadget_Freak @ Jul 22 2008, 08:25 AM)
Hi Dreamer,

Then when should i buy in your opinion? During recession? When I'm getting married?

Or should i buy the lower value property that my current rental able to cover?

And for the rental, my landlord didn't increase my rental in these 3 years but not sure in the future.

Thanks
*
Gadget_Freak,

1) House that you buy to live is NOT an asset. It is an expense

2) With the current supply and demand, what makes you think the land lord can afford to raise rent??

3) Your current rental is RM350. It is VERY CHEAP. Your cost of housing is LOW. So far, all your stated apartment will raise your housing costs multiple times. And, you DO NOT OWN the apartment until you paid off. The LONGER that you delay, the MORE down payment that you can afford.

4) Housing price is generally raise as per GDP growth. We are going into recession aka negative GDP growth.

5) If you are not even married, do not buy a house. What if your future wife change her mind and want to live some where else?/

Location, location, location. Decide in general where you want to live. Find out how much the house / apartment cost. Then, wait for a good deal. You are ONLY going to buy one or 2 houses per your life. Be patient. Do not rush into making this kind of decision. Or else, you will spend the rest of your life paying for this.

The house / apartment that you buy to live is based on where you want to live. It has LITTLE to do with whether it appreciates in value. You are NOT going to sell. And, even if appreciates for 20 years, when you sell is bear market, you lose money.

Dreamer

TSGadget_Freak
post Jul 22 2008, 09:59 AM

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QUOTE(Dragnaut @ Jul 22 2008, 09:30 AM)
Hi Gadget_Freak,

I know how you feel. I'm now looking for property in Penang as well. Although my budget is not as tight up as you, but the problem and uncertainty on the economy is the same.

Which area are you looking at? For myself I am looking at Bayan Lepas area.

To help deciding the price of the appartment to buy, my advice is that you should first check out which loan to take and calculate the installment base on 1 person basis. By saying that your installment should be about 50% of your 2k saving add up from both of you -- so that should be 1k. Hence I will advice you not take up any loan more than 150k (assume 30 years loan). To further secure yourself I will also advice you to take up fixed loan. Current fix loan is about 6%, you can check out Maybank (5 years fix loan, subsequently BLR-1.8%); AIA and ING offer whole tenure fixed loan.

Regarding the appreciation value -- I think it's very hard for non-landed property to appreciate now. It's either stagnant or most likely will drop during bad time. From my PoV Luxury condos are more vulnerable to price drop if recession hits. I am targeting landed, hoping it will not drop that much during recession. But after some discussion with friends, I think even landed might be on medium risks as well especially supply of property in Penang island now is more than demand (just go around and check out how many household lights up at 9PM and you can roughly guess the occupancy). During 90s Asia economy crisis some Singapore landed  and apartment value dropped by almost 40%. Even until now the value still not recovered back to its peak value. At that time Penang was not impacted much but the situation now is that there are more foreign investors invested in Penang property so I afraid to say that the bubble may burst this time, even for landed...

Just my 2 cents smile.gif
*
Hi Dragnaut, thanks for your reply.

I'm looking around Bayan Lepas area too but not limited to only there shall any better deal pop up.

I'm thinking to get Alliance loan as it offer the best deal so far from what i see and i have close friend working inside. The previous fix rate that he gave me was very good but not available since the rumour that BLR will be revised. Currently best offer from Alliance is BLR-2.2% for first 2 years and BLR-2.0% the rest tenure for flexi loan.

How about the fix rate from AIA and ING?

From the fix rate that my friend gave me, RM1k per month able to take up to RM175k loan, so property price would be roughly RM190k-200k(limit).

I'm agree with u that non-landed really hard to appreciate nowadays unless those luxurious condo, existing or newly launched that ppl like to goreng.

So now u are targeting landed at Bayan Lepas? Budget?

So your suggestion is wait for recession to hit and grab?

I'm buying for own stay and not for investment so appreciation value might not affecting me much. Having said that, I'm not sure whether i'll be in Penang for the next 10 years, i might be stay here forever (or perhaps i will upgrade when my earning is better), so as long as the property didn't drop, it is as good for me as i consider the interest as loss. Because of this, i'm not sure whether to grab those low medium cost apartment that around 100k-120k or straight go for higher end 190-200k or should i continue renting and wait for recession to grab.
TSGadget_Freak
post Jul 22 2008, 10:11 AM

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QUOTE(dreamer101 @ Jul 22 2008, 09:51 AM)
Gadget_Freak,

1) House that you buy to live is NOT an asset.  It is an expense

2) With the current supply and demand, what makes you think the land lord can afford to raise rent??

3) Your current rental is RM350.  It is VERY CHEAP.  Your cost of housing is LOW.  So far, all your stated apartment will raise your housing costs multiple times.  And, you DO NOT OWN the apartment until you paid off.  The LONGER that you delay, the MORE down payment that you can afford.

4) Housing price is generally raise as per GDP growth.  We are going into recession aka negative GDP growth.

5) If you are not even married, do not buy a house.  What if your future wife change her mind and want to live some where else?/

Location, location, location.  Decide in general where you want to live.  Find out how much the house / apartment cost.  Then, wait for a good deal.  You are ONLY going to buy one or 2 houses per your life.  Be patient.  Do not rush into making this kind of decision.  Or else, you will spend the rest of your life paying for this.

The house / apartment that you buy to live is based on where you want to live.  It has LITTLE to do with whether it appreciates in value.  You are NOT going to sell.  And, even if appreciates for 20 years, when you sell is bear market, you lose money.

Dreamer
*
Hi Dreamer, thanks for your reply.

1) Noted

2) My mistake, actually it is RM300 only. To be frank, I'm the 2nd owner of the unit. The total rent is RM500 and i rented out a master room for RM250, that's why i get 2 rooms for RM250 + rented parking lot for RM50.
There are some units start to rented out for RM600 since last year and for other decent apartments, it also started to be RM600 or above, so i'm not sure whether the landlord will revised the rental next year or not. And i also bear the risk if my master room housemate leave, i might have to pay fully for RM500 if i can't find any tenant.

5) My future wife like us to be settled there but my family is in KL. I also plan to settle down here but at the same time i also afraid that if my old parents need me back in KL to take care of them.

Actually i have in mind that where i want which is those apartments that cost around 180-200k (and constantly looking on any deal), just that i'm not sure whether should i spend so much on an uncertainty as i might be upgrade in future too if i afford to.

Patient is really my worst enemy and i still try to chg it to regret buying overprice unit. Thanks for your advise.
Dragnaut
post Jul 22 2008, 11:25 AM

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Hi Gadget_Freak,

I think AIA is giving fixed rate below 6% (I remember about 5.9%) but subjected to revise by August. ING is giving fix at 5.75. I'm not sure what are the other condition they may impose but I think the insurance company will expect you to buy insurance from them to cover your MRTA and life. My friend who bought SP Setia landed pay another RM500 per month on top of his loan to insure for him and his wife.

I'm still considering if to take up Southbay or not. It's 3 stories super linked house about 3000 sqft with gated and guarded community. I like the concept of gated of guarded despites it's freehold with strata titled, which means it need to pay RM200 maintenance per month. The price is 775k. It's targeted to be completed 2.5 years time so I think will not suit your immediate needs. Despites the developer (Mah Sing) is quite well known, under development project is still having risks of getting canned if recession hits.

By the time recession hit and the property price dropped I think the interest rate will increase as well, probably looking at BLR 8-10%... I briefly calculated based on 8% fixed interest rate, the property price need to fall down below 30% to make it worth to grab assuming 90% loan.

It looks like we have some similarity here -- I may not stay here forever. So to me property appreciation and location is the main factor to drive me to buy it.

If your patience is running thin I will advice you yo buy lower cost property, so even if it fall it will not fall too much as well. Also be reminded that you might need to have some reserve cash -- in case the property price fall below the initial evaluated value, the bank will either ask you to top up or not to worst might just prolong your payment period.

Just to share with you that I am a bit hesitated to take loan now as I am not sure what will happen if the finance institute go bankrupt during recession -- do we need to refinance at higher interest rate at time or we have to force clear all the loan by cash? This is also another potential factor to hold me back from buying now. If anyone know how will this situation will normally dealt with please share with me.

This post has been edited by Dragnaut: Jul 22 2008, 11:29 AM

 

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