Sunday, 27 March 2011

Property Ponderings

Ultimately, should Malaysia tick all my boxes, the biggest question for me will be what type of property to go for. At the moment Penang is at the top of my list so much of the information I detail here relates to that area. The information has been distilled from a variety of posts, messages, mails and research I have been able to do and is clearly biased towards the nuggets that particularly affect me and my needs.

General Considerations

There are 5 key questions for me:
  • Rent or buy?
  • Condo or landed property (e.g. bungalow/house)?
  • Old or new (and in that regard new/completed or off-plan)?
  • City or suburbs?
  • Leasehold or Freehold?
I have to say I have always been adverse to renting. I just view rental as dead money. There are some benefits though, particularly as a new resident. For me these mainly centre around checking out a place to live to make sure you are making the right decision (area or indeed country), the ease with which you can pack up leave from a rental should the need arise (liquidating an owned property will take time) and of course providing you with a roof over your head if you decide to go the new build/off-plan route. Once sure about the country/area however, ownership becomes a no-brainer for me. In Penang there are many properties around the RM 500K mark and you can get a reasonable rental there for around the RM 1,500 per month. Clearly the more you pay the more you'll get but this figure seems a good enough benchmark. You don't need to be a rocket scientist to work out that over, say, 5 years at RM 1,500 per month you would pay RM 90K in rental and on a RM 500K purchased property you could afford to sell it for just RM 410K (should the market decline) and still be no worse off. Over 10 years of course price you could sell at, if you had to, would be just RM 380K.

On the condo or landed property front I'm still undecided. One thing I don't want is a life of maintenance and chore tasks such as cutting lawns, treating wood, cutting hedges etc etc etc. There are however attractions to landed properties including having your own space, potentially fewer neighbour issues and the ability to design your own place. Condos also have some attractions however, in particular for me, the ability to "lock it and leave it" whenever the fancy to travel takes you (security less of a concern albeit there have been some reports of "inside job" break-ins with security guards suspected of letting the villains know of vacant properties), many of the condos seem better placed in terms of proximity to nightlife etc. and fewer maintenance issues (though this can depend greatly on the management company). A further consideration is whether condos appreciate as much as landed properties with suggestions that they may not. I will have to ponder this longer and visit several properties to form a view I think.

Old or new, again one I need to ponder more. Newer builds will obviously be more modern and, if you chose your builder/development carefully, can be of a good quality. This is important to me in terms of the electrics, water pipes etc, bathroom/sanitary fittings and state of the overall buildings. You need to be careful with a new build to ensure the builder does not intend to use asbestos based ceiling tiles in bathrooms and kitchens as it is still a commonly used material. This is clearly an important consideration for older builds to, rental or purchase. Some of the older buildings are well established and some, such as Miami Green, have a good reputation because of their management, security and design (MG is built in an apart-hotel style with good facilities) and are popular with expats. I need to check out whether I think these benefits are worth the premium some of these properties command. It's all a personal choice again. Clearly the off-plan option is under this heading too and the main benefit to this to my mind is the significant savings with properties being bought, for example, off-plan a year or two ago at RM 350K and now going for RM 550K. Even taking into account rental for 1-2 years this represents a significant saving!! Indeed, something that is somewhat alarming is the rate at which property prices seem to be escalating in Penang with many properties having gone up by 10-15% since January 2011 alone! The question is, is it sustainable? Finally, while considering this option, it is important not to forget renovations. Possibly worth considering in an older building and either DIY or using an renovator. An issue of course will be how good the infrastructure and fabric of the building is, water pipes, electrics, walls and water-proofing. In Abu Dhabi complete blocks used to be shut down by developers and renovated allowing a 'deeper' refurb to be done (sometimes!!!!). Not sure yet if this happens in Penang.

Finally, city or suburbs? And, again one I need to ponder more. The major cities such as Kuala Lumpur or Georgetown have their attractions being well placed for all amenities. The downsides include the levels of noise in some cases, traffic congestion (and the resultant pollution) and the feeling of claustrophobia that busy city living can bring. There are of course also suburbs and suburbs. For me, in Penang the choice will likely come from one of the major contenders (e.g. Gurney Drive, Batu Ferringhi, Tanjung Bungah and Tanjung Tokong). All have their benefits and the main purpose of my first trip will be to see what ticks most of my boxes, there will inevitably be compromises to be made. Another thing I need to check out, though maybe not this time around, is some of the property in other parts of Penang and even elsewhere in Malaysia where prices can be substantially less. I do however need to be careful that the cheaper property cost does not come with a heavy impact in terms of quality of life and at the expense of things to do. This could lead to a miserable existence and would be false economy.

Lease or freehold is also a no brainer for me, but something to check for. I always favour freehold over lease as it is just so much easier to sell on IMHO.

Some Specifics

Mainly so I have the details in one place for when I get there, some suggestions from current and prospective MM2Hers in terms of property and guide prices (as at March 2011). Property comparison is often quoted in price per square foot (ppsf/psf) and, where relevant, I have included them and will update this to show some complete unit prices when I get them. On the condo front Im Malaysia, as with many countries, as the floor level goes up (often providing better views) the price goes up also, sometimes at an alarming rate:

  • Seaview Gardens: An older property (1995) with some of very questionable quality with prices between RM 520 - 680K being asked for!!! 'Sea Range' and 'Reef' are similar older condo buildings.
  • Ferringhi Mutiara Apartments (Batu Ferringhi): Going at RM160k each
  • Miami Green (Batu Ferringhi): Popular but at a price. An older property at approx RM 500 psf. G block is the newest. The views to the rear are none to attractive so I believe and the higher level apartments with better views command very high prices. At the time of writing asking prices for the units there were between RM 488K - 600K (likely for the higher floor levels).
  • Fettes Residences: 415 psf. New.
  • Brezza (Tanjung Tokong): 500 psf. New again and near the E&O Straits complex and Tesco!! Prices off-plan were RM 350K, now RM 490K!!! Problem here is that unless the developer has converted, these properties were leasehold
Further options include Georgetown (above Times Square) and south of the bridge where there is a lot of new development.

At the moment the Tanjung Tokong area appeals to me and potentially an off-plan or new build. The trip I am sure will reveal a lot more but I am indebted to the mails, posts and comments from various forum members and contacts for providing this very useful information.

So, that's it for now. I'll update this if I come across more useful nuggets before my trip and of course there will be more updates, with pics, once I am there.

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