Buying vs Renting Property

This is a boring topic for most to go through, as you can find similar article in financial magazines or newspapers. However, I would like to share my experience from a more personal viewpoint rather than financial viewpoint. A viewpoint from someone who migrated from other states to Klang Valley for a living.

Almost 50% of the young working adults in Klang Valley do not grow up here. Many found a job in the city and made city their home after having a stable career. Many who came from foreign state rushed into buying properties during the first few years of their working life. A lot of them do not want to "service the loan" for their landlords, while some are worried about the quick-rising house price. It's really a tough decision to make, especially when your income is merely in the range of RM 3-4K. So , what are the factors you should consider before buying a property?

1. Do you really like city life?
Many of my friends went back to their hometown within 5 years after working in the city. Some of them find it hard to cope with working stress and the high living cost, while some find city a cold and boring place. I had a friend who constantly having gastro problems when she started working in the city. Doctors are unable to diagnose what's her problem exactly but she has recovered after going back to her hometown. Do you really like city life ? Are you ready to bite through the bullet and go through the city struggles? If not, renting a place is still the best option during the first 3 years of your working life.

2. Which city do your want to be exactly?
Many of my friends started to work in Penang and moved to Kuala Lumpur eventually, vice versa. I have also friends who worked in Kuala Lumpur and decided to move to Singapore after getting fed up with the rising crime rate. If you are not sure about the city that you plan to settle down with, be safe, rent a place.

3. Are you the only child?
Well, many will wonder why this is important. Think about this, what if your parents wants to stay with you? You need a bigger house ? Or you might need to move back to your hometown?

4. Do you have a stable relationship/ planning to get married ?
Sometimes your wife/husband might have different plans on whether to settle down in the current city. Be sure about it.

5. Where do you prefer to work at?
My neighbour is an interior designer. He just sold his house two weeks back. He works in Damansara Heights and interior design companies normally have their premises located at the city center. It's hectic for him to travel from house to work and he had realise that he had made a wrong decision buying a place far from his work place.

6. Are you paying more than 3 % of the total property value per annum for your rental?
If the property you have rented cost you RM 500 per month(RM 6,000 per annum), the average value of the property should be 6,000/3% = RM 200,000. If you are renting a property worth more than 200K at Rm 500 per month, you can slowly look for a property you like before rushing buying into one.

7. Can you afford a property which you don't mind staying in with a housing repayment as much as 25 % of your income?
If you are making RM 4000 a month, you can afford to repay RM1000 for your housing loan. Are you able to afford that and would you stay in the property after it is ready ? Many bought their properties without doing proper survey. They bought simply because it is cheap and affordable. Some chose to continue renting a place even after their properties are completed because they don't really like the place they bought. Why do you want to buy in the first place if you know you won't be staying in that property?

8. Are you looking for an investment or a place call home ?
Many do not have an idea what exactly they wanted, a property for investment or for own stay.
It is hard to satisfy both criteria unless you have gone through hundreds of property in town. Rule of thumb, if you are looking for a property for investment purpose, ensure that it generates positive cash flow.(Malaysia's property has very low capital appreciation, ranging from 2-4 %, which is lesser or same as FD) If you are looking for one for own stay, make sure you like the place, capital appreciation is secondary. Never force yourself to purchase a property just because of the capital appreciation potential. You might regret someday.

So, are you ready to buy one now?

Enhancing Value of Your Neighbourhood

I stay in Puchong. This year marks the 10th anniversary of my stay as a Puchongnite.

When I made my decision to own my house in Puchong 6 years back, it's was really tough to tell people that you actually bought a house in Puchong. Back then, it makes you look stupid investing in a place full of mining pool and shady shoplots-some are even renovated into dodgy pubs. IOI mall has so many vacant lots and their anchor tenant, The Store, could not even survive. Many asked me why I bought a place in such areas (a.k.a low-class-area). Many recommended Subang USJ to me at that time. My answer was simple, without help from anyone, how can you afford to own a landed property in Klang Valley after working for only 2 years?

I have never stayed in a strata property before in my life-time (my entire hometown has only 2 blocks of residential apartments) and I came from a foreign state where landed freehold properties are halved the price of Klang Valley's. It's really tough to make a decision to own a relatively expensive piece of property in the early days of your working life. However, I knew I wanted a freehold, mining-free, gated landed property in Klang Valley and the properties that fits into the category are getting scarce day by day.

Setting price factor aside, one of the reason I bought a place in Puchong instead of Subang is because Puchong has plenty of land. You might be surprise with this reason as it contradicts with the normal rule of economics where scarcity increases the value of goods. I knew about this, I know Puchong's property value might not appreciate fast. However, when I look at Subang from Google Earth, the entire area was very well planned with little space for roads and highways. Most of the land are built with landed properties and you hardly see any vacant land plots on the map. The Subang's population will be saturated and the commercial properties are not doing well here. Subang is definitely a no no for me to stay as I hate traffic jams. On the other hand, a future city with vacant lands gives the future city mayor a chance to plan for a better city. I always tell my friends that Puchong will be a bigger city compared to Subang in years to come. I chose Puchong.

Some of my major concerns when buying a house during my early 20s:

• Price & Budget
• Crime Rate & Security
• Neighbourhood
• Landed, Tin-Mining-Free, Freehold

I knew there are many more concerns for everyone else but the 4 above are my major ones. My Puchong property had everything right except for the neighbourhood factor. For sure, you do not want to stay close to foreign labours, drug addicts or prostitutes. Also, you want your next generation to study with other kids who are brought up in a good family. The question now would be, how can you be sure about your neighbourhood when you are buying a newly developed property.(the neighbourhood has not been established yet).

Of course price factor does come into the picture, but we have to take price factor aside in this discussion. (or I will just stay in Kenny Hills) My best friend bought the same area two years after me and we started to promote Puchong to friends. Most of our university mates are working as professionals now and I ended up having most of my university friends staying in Puchong now. I am very surprised as my housing area are now occupied by doctors, lawyers, engineers, architects, professors, lecturers etc. Even better, 10 % of them came from my hometown and many of them came from my home state. I am satisfied with my neighbourhood now as everyone are very co-operative and we have a very good security management.

A peaceful and friendly neighbourhood greatly enhances the pleasure of your stay in a particular housing area. A good neighbourhood also increases the value of your housing area indirectly. It is therefore important to do your part to create a pleasurable neighbourhood. Some of the things my residential committee and neighbours does:

• Pay security management timely
• Keep the roads clean
• Organise seasonal events
• Alert every residents on any burglary cases within the neighbourhood
• Alerts the security when suspicious foreign labour found wandering around (they climbed over fences sometimes for shortcuts, as what they claim)
• Do not simply park their car outside your house (it's very annoying, and part of the reason being, a young neighbourhood generally has less cars)
  

On a side note, Subang's property prices are falling lately. Apparently, Subang's crime rate is getting worse according to the latest report. And who says Puchong's property is cheap now? IOI latest two-and-half storey terrace house is launched at the price of RM880K for an intermediate unit.

I love Puchong.

Snippets: Malaysia Property Outlook

I have been checking out on different opinions on Malaysia's Property Outlook lately. Some of the interesting views and arguments I found.

http://malaysiafinance.blogspot.com/2008/07/frank-assessment-of-property.html

http://biz.sinchew-i.com/node/14940

http://biz.thestar.com.my/news/story.asp?file=/2008/7/14/business/21807128&sec=business

http://www.estate123.com/reviews_articles/article_review_detail.aspx?a_id=59

http://www.bnm.gov.my/files/publication/msb/2008/5/pdf/5.15.pdf