These two residential properties are popular among first-time home buyers and renters in urban areas – after all, who doesn’t love living in a fully-furnished building with awesome facilities? They may appear to have the same characteristics, but there is actually a pretty big difference between condominiums and serviced apartments – in terms of living environment, tax rates and homeownership benefits.
On the surface, serviced apartments seem like the fancier sibling of the condominium – and that is partly true. Nevertheless, not all serviced residences come with the benefits that most homebuyers will expect and there are some considerations in which the condominium trump a serviced unit. In this article, we will take a closer look at both housing options to help you decide which will be a better fit for you:
What is a Condominium?
Condominiums are multi-storey residential buildings built on residential titled land – think of them as an upgrade from apartments, which only provide the basic amenities. The units in a condominium are owned by different individuals, where owners have at least one allocated parking space and enjoy round-the-clock security. It is usually a favourite choice amongst families for the sense of privacy and security it provides.
Despite having individual ownership, condominiums ooze a community vibe with its abundance of non-exclusive common facilities. Most condominiums have exercise yards, terrace gardens, swimming pools, recreation rooms, gyms, playgrounds, and parking spaces which are all overseen by the joint management body (JMB) or Management Corporation (MC). Some condominiums even have a residence club and daycare centres!
What is a Serviced Apartment?
Serviced apartments are usually marketed as being more luxurious and exclusive as they were initially built to cater to travellers and businessmen who prefer something more comfortable than a hotel – these fully furnished units with hotel-like amenities are mostly located in busy commercial hubs. They are usually part of an integrated or mixed development which features connected access to a mall and/or office units.
Serviced apartments are popular choices amongst those who want to spend their vacation or business trip in a homey environment and yet enjoy all the luxuries of a hotel. It is not surprising to see that many Airbnb units in the Klang Valley, Penang and Johor are usually serviced units.
However, that does not mean that you cannot live here for the long term. If you are a person who prioritises convenience like having easy accessibility to a mall, eateries and public transport nodes, then a serviced apartment will suit your needs extremely well. Bear in mind that not all serviced apartments are available for sale to the public – some are owned by a single corporation who manages said property, either for property investors or on behalf of the developer.
What’s the difference between Condo and Serviced Apartment?
The land status of condos is “residential-titled” whereas the land status of serviced apartments is “commercial-titled.” That is why the laws, tax rates and the functions between the two are very different.
If you live in a serviced apartment, your electricity, sewage and water tariff or bills will be much higher than the residential rates charged for condos, as they follow commercial rates for utilities. As condominiums are private residential spaces, they fall under Tariff A – Domestic Tariff whereas serviced apartments are low-voltage commercial buildings, hence they fall under Tariff B – Low Voltage Commercial Tariff.
Here we lay out the electricity tariff rate from Tenaga Nasional Berhad (TNB) to help you estimate the electricity cost difference between condo and serviced apartment.
Tariff A – Domestic Tariff (Condominium)
|Minimum monthly charge = RM3.00|
|For the first 200 kWh per month||sen/kWh||21.80|
|201 – 300 kWh per month||sen/kWh||33.40|
|301 – 600 kWh per month||sen/kWh||51.60|
|601 – 900 kWh per month||sen/kWh||54.60|
|901 kWh or above per month||sen/kWh||57.10|
Tariff B – Low Voltage Commercial Tariff (Serviced Apartment)
|Minimum monthly charge = RM 7.20|
|For the first 200 kWh per month||sen/kWh||43.50|
|201 kWh and above per month||sen/kWh||50.9|
As for water bills, according to Air Selangor, the minimum water tariff for commercial buildings such as serviced apartments is RM36 whereas the domestic rate for condominiums with residential land titles is only RM6 – that is 1/6th the price you pay for a serviced residential unit!
Is there a way to convert the commercial utility charges for Serviced Apartments to Residential utility rate?
This ultimately depends on your developer. Sometimes, developers of serviced apartments can negotiate with the utility companies for a lower price. So, before you buy a serviced unit, it is better to first ask if such an arrangement is possible as it can save you quite a bit of money on monthly utility bills.
Parcel Rent and Assessment Charges
Before we discuss the rates, here’s what Parcel Rent and Assessment Tax mean.
Parcel rent is a type of land tax that is specifically meant for strata properties – it is governed by the Strata Management Act (SMA) 2013 and the Strata Titles Act (STA) 1985. Each parcel (unit) owner would be billed parcel rent for the entire square footage of the building. Strata owners were previously charged Quit rent, this was replaced with parcel rent from June 2018 onwards.
Assessment Charges or Cukai Taksiran on the other hand is collected by local authorities to finance the construction and maintenance of public infrastructures. Since Serviced Residences are built on commercial land, both their Parcel Rent and Assessment Charges are relatively higher than Condominiums.
The table showcases the Parcel Rent charges difference between Condo and Service Apartment:
|Freehold||RM 0.26 per metre square
(Limited to a minimum of RM 25/parcel)
|RM 1.27 per metre square
(Limited to a minimum of RM 55/parcel)
|Leasehold||RM 0.19 per metre square
(Limited to a minimum of RM 20/parcel)
|RM 1.21 per metre square
(Limited to a minimum of RM 50/parcel)
Meanwhile, Assessment Tax is based on the annual rental value of your property, which is estimated to be around 2-7%. This tax will also vary based on the size and type of property. Since serviced apartments often come with more facilities and conveniences then condominiums, the Assessment tax will be slightly higher
However, don’t be discouraged by the high prices to be borne for serviced apartments – you usually get to enjoy a better range of facilities and conveniences than their condominium counterparts. Besides, some developers do try to get lower Parcel Rent and Assessment Tax for serviced apartments if they can secure a loophole in zoning laws to reclassify them. To know more, read Quit Rent, Parcel Rent and Assessment Charges in Malaysia
What is the tax rate difference between Condo and Serviced Apartment?
Other than the Parcel Rent and Assessment Tax, there are no other differences in tax rates between serviced apartments and condominiums.
How does the maintenance fees differ between Condos and Serviced Apartments?
The maintenance fees for serviced units is higher than condos as they are based on commercial rates instead of the residential rate.
- Most condos are private residential spaces with a security system in place to monitor who comes in or out of the property.
- As for serviced apartments, since most are attached to shopping malls or retail shops, outsiders could enter the compounds of these properties with unrestricted access. However, most serviced residences have separate entry points for residential and common use so that residents are given some privacy.
- Residents of serviced units don’t have any control over the business that set up shop in the development compound or the people coming in and out of the property. Condo residents, however, have more say in the matter since these strata properties are specifically for residential use.
- When living at a serviced unit, you have the privilege of easy access to good restaurants, amenities like laundromats, convenience shops and movie theatres. Condos on the other hand don’t necessarily have such conveniences at your disposal.
- If you prefer peace and quiet but still want to live in a serviced apartment, you can also opt to look for one which is not attached to any shopping malls. These may be hard to find but not impossible.
A condominium is built based on population per land size or density. The development of Serviced Apartments meanwhile, is based on plot ratio which is the total built-up area per land size. This allows developers to increase its maximum allowable units in a certain space compared to Condominiums.
For example, if you are allowed to build a condominium with 180 people per acre, and you estimate that 3 people can live in a 725 square feet unit, then you can build a maximum of 60 units.
On the other hand, if you are building a serviced apartment, you have to adhere to the plot ratio. Let’s say a developer is allowed to build a serviced apartment on a plot ratio of 1:4. Hence, if you have 1 acre of land (43,560 sq ft), you will be able to build up to 174,240 sq ft of floor area – this means you can build approximately 240 units sized at 725 square feet each within the same size of land.
As a result, the population density of condominiums is often less than serviced apartments, giving residents more space and comfort.
Are there different housing regulations for Condos and Serviced Apartments?
Both serviced apartments and condominiums are covered under the Housing Development Act (HDA) 1966. Although serviced apartments are built on commercial land, this property type qualifies as it is partially or wholly used for residential purpose. Both property types have the standard Sale and Purchase Agreements (SPAs) and fall under the jurisdiction of the HDA.
The confusion over homebuyer rights for owners of serviced apartments and condominiums mostly stems from the misunderstanding that SoFo, SOVOs, SOHOs are serviced apartments. Do note that serviced apartments are separate from all of the above.
Sometimes, developers may sell you these units as serviced apartments. Hence, make sure to check the fine print of the marketing brochures as SoFo, SOVO or Flexi Designed Suites are essentially made for office/business use and not primarily for residential purposes. Developers of SoFos and SoVos are not obliged to observe the rules and regulations under HDA and are free to set all terms in the SPA as they see fit.
There is an exception for the Small Office Home Office (SoHo) – it could work as either a home or office. Since SoHos are ‘residential-purposed’, they are considered as housing accommodation and thus falls under the Housing Development Act (HDA).
Is it worth purchasing a serviced apartment in Malaysia?
It boils down to the lifestyle you prefer, your hobbies and what matters to you – Is prime location a deal-breaker? Is access to retail and commercial conveniences a top priority?
If you answered yes to the above questions, then serviced apartments would better suit you. For example, if your aspiration is to live in a posh, fully furnished residential unit in the heart of Kuala Lumpur, you can check out Vortex Service Residence in KLCC or M Vertica in Cheras – both are built in strategic locations with mall amenities and various transport nodes such as LRT and monorail stations nearby. The Sky Park Residences in Bukit Jalil is also perfect for working professionals and expats based in the city centre. Looking for more serviced apartment options? Browse these listings!
Should you prefer something more conducive or a living space for your family, you can opt for a condo unit such as Casa Green Condominium in Cheras or Armanee in Damansara Damai as these have big spacious layouts from 1,500 sq ft onwards with all the conveniences your family could dream of right at your doorstep. More condominium options here.
Now, if you are looking for a new serviced apartment or even a condominium at a good deal in the current market, have a look at these brand new launches under the Great Property Deals campaign. These featured properties include discounts such as the HOC, free legal fees and more, prices start from RM266,000 and in diverse locations such as Puchong, KL City, Subang Jaya, Kota Kemuning and more.
Read this article next: HOC 2020 extended until 2021! Here’s what homebuyers should know