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Is now a good time to sell or buy a property in Malaysia?


*This article was updated on 17 July 2020.

There’s a lot happening in the current property market including the recently announced real property gains tax (RPGT) exemptions and stamp duty holidays under the Home Ownership Campaign (HOC). Let’s see how you can take advantage of these incentives.

© baona | Getty Images

If you are thinking of selling your house now, prices may not be at their most favourable. On the other hand, if you are looking to invest in property, you have the advantage of the current buyer’s market. Whether you are a seller or a home buyer, there are steps you can take to position yourself for when the opportunity for you appears.

Current property market updates

First, let’s look at the situation on the ground.

Did you know that asking prices for properties in certain areas in Malaysia actually increased in the second quarter of this year? The Malaysia Property Market Index 2020 showed that prices in 2020 increased slightly for Selangor and Kuala Lumpur as the supply of new property in the market dropped sharply during the Movement Control Order (MCO). This should be good news for those looking to sell their property and wondering if prices are just too low to make the move.

Meanwhile, let’s not forget what was happening even before the Covid-19 pandemic hit and the MCO shut down all construction activities. By the end of last year, the number of unsold completed residential properties had soared above 45,000 units valued at over RM30 billion. According to the National Property Information Centre (NAPIC), this supply overhang has been growing in the last four years. This has created the current buyers’ market condition where those looking to invest in properties have the advantage.

Additionally, the recent announcement by the government to launch the PENJANA Economic Recovery Plan also included a revival of the Home Ownership Campaign (HOC) with stamp duty incentives as well as a special RPGT exemption, which will benefit both homeowners and property investors.

Given these market conditions, here’s what you need to consider as a seller or buyer now.

For those who plan to sell a residential property in 2020

In the current buyers’ market, many property owners may adopt a wait-and-see attitude and not sell their houses at current prices. However, holding on to an investment property comes with its own costs as well.

Here are the key facts for property sellers:

1. Cost savings from Real Property Gains Tax (RPGT) exemption

Buyers can save on paying RPGT for up to 3 residential property sales from 1 June 2020 until December 2021, so this might allow more room to negotiate prices with potential home buyers. On 5 June, Prime Minister Tan Sri Muhyiddin Yassin announced that the government will be lifting the RPGT charged upon the disposal of a property with the aforementioned terms.

© Andriy Popov/ 123RF

The following is how much you save on RPGT for a property with a current market value of RM600,000 which was previously bought at RM500,000.

Property selling priceRM600,000
Property purchase priceRM500,000
Chargeable gainRM100,000
Exemption waiver* allowed:
RM10,000 or 10% of chargeable gain
Total amount subject to RPGTRM100,000 – RM10,000 = RM90,000
Sale in Year 1 to 3Sale in Year 4Sale in Year 7
RPGT rate depending on holding period30% x RM90,00020% x RM90,0005% x RM90,000
Total RPGT amount savedRM27,000RM18,000RM4,500

* Once-in-a -lifetime exemption waiver on the chargeable gain on disposal of 1 private residence by a Malaysian citizen or Permanent Resident (PR). There are other types of RPGT reliefs that you can take advantage of if you qualify.

2. Loan moratorium ending in September 2020 might see a sudden increase in properties for sale

Although the government has announced various measures to stimulate the economy, the road to recovery may take some time, and it depends on each individual as well.

Property owners affected by the pandemic may not have the financial capability to afford their mortgage loan once the bank starts demanding payments for the loans. Bank Negara Malaysia (BNM) is already projecting that non-performing loans (NPL) will rise once the loan moratorium ends. Sellers may be faced with stiffer competition as more properties become available for home buyers to pick and choose.

FIND OUT: BNM’s 6-month loan moratorium: What is it and how can it help you?

3. Enjoy lower interest rates for your home loan

On the other hand, existing property owners with home loans will also see a reduction in their monthly home loan repayments from the recent cut in the Overnight Policy Rate (OPR). On 7 July 2020, Bank Negara Malaysia slashed the OPR by 25 basis points to 1.75%. This was the fourth OPR cut in 2020 and is the lowest rate since the floor was set in 2004.

Let’s say you have an existing home loan with an interest rate of 4.00%. A 0.25% OPR rate cut will see your interest rate reduced to 3.75%. So, you can expect to pay several hundred ringgit less in monthly mortgage payments which can amount to over RM20,000 or more in total interest savings when you eventually finish paying the loan.

Loan amountRM500,000
Loan tenure30 years
Home loan interest rate4.00%3.75%
Monthly repaymentRM2,148.37RM2,084.02
Total interest paid over 30 yearsRM323,412.78RM300,247.26

You should consider these potential cost savings when deciding whether to sell or hold on to your property in the current market conditions. If you are selling a property for the first time, read this first! We would recommend you to employ a real estate agent to manage and screen potential buyers. A good agent will also be able to provide you with more insight on how to position your home during this market downturn.  Start searching for a real estate agent that will suit your property type and area here.

CHECK OUT: Malaysia’s Top 7 High-Rise Properties with the Highest Rental Yield in 2019

For those who plan to buy a property in 2020

Whether you plan to buy now or next year, industry experts predict that it’s going to be a buyers’ market for the next few years so don’t pass up this advantage to get a better deal. According to CBRE | WTW’s managing director Foo Gee Jen, it may take more than five years for unsold residential units to be absorbed into the market

Here are the key facts for buyers:

1. You get to leverage on a lower interest rate for your home loan

© Andrii Yalanskyi | Getty Images

The 2% Overnight Policy Rate (OPR) is the lowest now since 2009. In fact, it has been reduced by a 100 basis points this year to help cushion the economic impact of the COVID-19 pandemic. This low bank lending rate is a big advantage if you are looking to take out a home loan to buy a property now as it could reduce your monthly loan repayments by over RM1,000 or more for bigger loan amounts.

2. Pay lower or zero stamp duty fees to buy a new residential property

This applies to buyers of new launch residential properties priced between RM300,000 to RM2.5 million. The government will provide a stamp duty exemption on the Instruments of Transfer and Loan Agreement that is applicable to the first RM1 million of a home purchase price. For properties priced beyond a million, only the Loan Agreement bit is fully exempted while stamp duty on the Instrument of Transfer will be calculated on a tiered basis.

Moreover, property developers must offer a 10% discount on selling prices to qualify for the HOC campaign. This exemption is available until May 2021.

Here’s how much you can save in stamp duty expenses if you plan to buy a RM500,000 property with a RM50,000 down payment.

Property price RM500,000Stamp duty amount
Stamp duty for the transfer of ownership title1% for the first RM100,000
2% on the next RM400,000
3% on additional amounts above
Stamp duty for RM450,000 loan amount0.5% of loan amountRM2,250
Total stamp duty savingsRM11,250

3. Up to 90% financing limit beyond second property purchase that are priced above RM600,000

Buyers can now get a loan of up to 90% of the price of a property for homes priced above RM600,000. Previously, property buyers were limited to 70% financing for their third property onwards. This makes a huge difference in the upfront cash you need to fork out.

4. Keep track of your credit score

Banks will be more cautious in approving loans now for certain employment sectors that have been badly affected by Covid-19. You should therefore maintain a good credit score to increase your chances of getting your loan approved. In Malaysia, your credit score is reflected in your CCRIS report – which lists down all your outstanding loans (mortgage loan, personal loans, credit cards, overdrafts, etc.) and their corresponding outstanding amounts, credit limits, payment misses, details of legal cases, etc. It also includes information on any joint loan taken or a partnership loan

Before you start applying for a home loan, make sure to first to check whether you have a healthy Debt-to-Service Ratio (DSR) – You can utilise a home loan eligibility tool to do so. DSR is used by banks as a benchmark to gauge your financial health when reviewing your home loan application.

As a buyer, you should also take into account whether you are buying a house to make it your home or for investment. These are very different reasons and will have different impacts on how you plan your finances. The best time to buy is when you are financially ready, regardless of how the property market is performing.

While the government is pulling out all stops to get the economy back on track as soon as possible, the property sector may have a long wait ahead. A recent survey by KGV International Property Consultants of property investors behaviour revealed that 70% of the respondents cited price as their main consideration when deciding whether to buy a property post-MCO.

Ultimately, it comes down to the property price for both home buyers and sellers. Would you buy or sell your house now?

This article was repurposed from “Is Now The Best Time To Buy Or Sell Your Property?” on | Edited by Reena Kaur Bhatt

Disclaimer: The information is provided for general information only. Malaysia Sdn Bhd makes no representations or warranties in relation to the information, including but not limited to any representation or warranty as to the fitness for any particular purpose of the information to the fullest extent permitted by law. While every effort has been made to ensure that the information provided in this article is accurate, reliable, and complete as of the time of writing, the information provided in this article should not be relied upon to make any financial, investment, real estate or legal decisions. Additionally, the information should not substitute advice from a trained professional who can take into account your personal facts and circumstances, and we accept no liability if you use the information to form decisions.

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