PROPERTY investment is a common investment platform in Malaysia but the trend is often driven by new properties, where the attention on the primary market is significantly higher than the secondary market.
However, Datuk Ng Seing Liong, past president of Real Estate and Housing Development Association (REHDA) and MD of Kota Kelang Group, pointed out that there are still good deals in the secondary market, sited in good locations and tagged with reasonable prices, such as in the old areas of Petaling Jaya like SS2, SS1 or SS5. He noted that a hindering factor could be the unavailability of loans for renovations.
“Banks will only issue loans based on the value of the property, excluding renovation cost,” he said.
“For example, an old bungalow in SS5, SS6 or SS7 is in the region of RM1 million and one can get a loan for around RM800,000. To move in, one would have to chip in around RM500,000 for renovation and maintenance, such as roofing, wiring and piping for a 30-year-old house. The buyer will not get the loan for renovation cost,” he said.
According to Ng, this leads to difficulty in selling and owners are forced to sell at lower cost.He also said that even with the extra cost for renovation, these properties are still worthy compared to new bungalows priced at RM2 million or RM3 million.
“Even for terraces, buyers will still need to chip in an extra RM80,000 or RM100,000 for renovation, yet it is still reasonable compared to new properties,” Ng opined.
“Even in Klang, old houses are priced around RM300,000 compared to new ones nearby priced RM800,000 and above. After renovating the old house, it is as good as new,” Ng emphasised.“I find it strange that new areas are pricier than old areas whereas in other countries, established neighbourhoods could be pricier,” he highlighted.
“On top of that, there are a lot of people who can afford the renovation cost for old houses, widening the wealth gap. The banks and people perception must change.”
Siva Shanker, Deputy President of Malaysian Institute of Estate Agents (MIEA) said that the secondary market has good potential in the coming year as the houses could be 30% to 40% lower than new ones.
“In Kuala Lumpur City Centre, existing condominiums are priced around RM1,000psf to RM1,800psf. However, for new launches, the prices are RM3,000psf to RM4,000psf, nearly double the secondary market price. Buyers can get nearly 50% discounts for old properties in comparison,” he pointed out.
“In Bangsar, a new condominium is offering units priced at RM1,500psf, while other old ones in close proximity are in the region of RM600psf to RM1,000psf. For old properties, they don’t have contemporary features but the prices are lower,” he stressed.
“Technically, new launches are supposed to be lower-priced due to incompletion, but the speculation drives prices up,” he said.
According to Siva, speculation does not rule the secondary market whereas in the primary market, there is a lot of flipping interest.
“Now, since speculations have diminished, developers find it difficult to sell off their properties. Maybe there won’t be any price drops but the prices will not skyrocket,” he opined.Siva also believes that the highlights on new property launches by the mass media have sidelined the available options in the secondary market.