For home buyers, a choice between new, old or old-new

Thinking of buying a property? After having decided on location, price and the type of property – terrace versus high-rise – the final decision awaits: buy off-plan or an existing property?

The answer used to be pretty straightforward years ago.

One either bought from the developer (in property parlance the primary market) or directly from owners, in the secondary market.

However, it has become more tricky now. Buyers now have a third choice, because of the large number of completed unsold units, known as the overhang.

As at the end of December 2020, Malaysia had 29,565 completed but unsold housing units built on residential land, with a value amounting to RM18.92 billion, according to the National Property Information Centre’s latest Property Market Report 2020.

There are an additional 23,606 units of unsold serviced apartments, built on commercial land, valued at RM20.76 billion.

That’s more than 53,000 housing units yet to be waiting to be off-loaded by developers.

Buyers can now buy these overhang units, or they can buy “off-plan” — units which are all works in progress.

Let’s call the overhang units “old new” properties. They may have been completed three to four years ago, maybe even longer, but they have never had an owner.

Developers now have all these uncompleted projects which they have to sell. As long as these units remain unsold, their cash is stuck in the ground. Like all businesses, they need cash flow, in the best of times and the worst of times,

Pandemic-driven perspectives

The property development industry, like other sectors of the economy, went through a challenging 2020, with disruptions from the many different movement control orders.

Have these disruptions affected work quality and processes, asks a property agent of more than 30 years. Will what you see in the brochure actually be what you get?

It is an important issue to consider because a property is a big-ticket item, and buying one involves long-term commitment.

His rationale is that a completed unit can be seen and touched.

“You can see the plus points and the negatives. You know more or less what you are going to get. If the other units are already occupied, you know who your neighbours will be, whether they are tenants or owners.

“You can select the unit if there are many units available.

“Many people buy units off-plan because of the many incentives offered by developers. These buyers want the best floor, the best unit according to their price point, the best orientation in terms of view.”

These, he said, are reasonable demands but because of Covid-19 and the possible different disruptions, they must also consider how the pandemic has impacted developers and the broader construction industry.

Developers are capitalists. Making a profit is their number one priority.

“(So) if you have to buy, you may want to consider a completed unit. Besides being able to see the unit instead of having to imagine it, the effective price after the various incentives may be lower than the earlier launching price,” he said.

The buyer will also have stronger negotiation powers over the developer, he said.

Living with Covid-19

But a senior marketing manager from a property development company building its first project was quick to debunk those views.

“If you buy a completed project, you may not have to worry about it being abandoned (due to a developer falling on hard times) but you have an ‘old new’ property,” she said.

“There are a lot of considerations today which developers never thought of before.

“Today, I have to work from home. I want a proper work area. Working from home was never a consideration pre-Covid. It is a huge factor today.

“A proper work area is a new norm in property development today. It is not just space for work, but the desire for space and not a pigeon hole,” she said.

“Do you want to be in a dense pigeon hole? When you are working from home, do you want your wife, your mum-in-law asking what you want to have for lunch?

“Before, everybody packed into a lift like sardines. Today, if there are more than five, you will say it is crowded,” she said.

Living with the pandemic is a factor that developers now have to consider.

While a house is still a house, the norm then and today are different because of Covid-19, said the senior marketing manager.

The “old” new overhang unit may be a bit tired, says the marketer.

A property consultant thinks what is important is whether one should buy from the developer or from the house owner.

Whether he buys off-plan or from old stock, he is still buying from the developer and that purchase comes with various incentives, whether it is off-plan or a unit completed a few years ago.

However, if one were to buy from the house owner, there will be no incentives.

As for developers, contractors and workers compromising on building quality as a result of the various degrees of restricted movements, labour and supply issues, he does not think such claims hold water — but the matter is one that buyers are looking at.

After all, with so much oversupply, it is a buyers’ market.

Source: FMT