A first-time buyer's guide to property in Malaysia

By Joseph Wong

Buying a first property is one of the most significant financial decisions one will ever make. It marks a milestone in adulthood and can pave the way for financial growth and long-term stability. However, this journey is not without its challenges. While it is tempting to jump headfirst into the process, many first-time buyers fall into avoidable traps that can turn their dream home into a financial nightmare.

Over the years, StarProperty has closely observed the patterns and pitfalls faced by first-time home buyers navigating Malaysia’s dynamic and often complex property market. While the dream of owning a home is exciting and deeply rewarding, it also comes with a host of challenges and decisions that can easily overwhelm the unprepared. 

Through countless interactions with industry experts, developers and buyers themselves, five common mistakes have consistently stood out. These errors could lead to financial strain, regret or missed opportunities. As part of its ongoing commitment to empowering and educating home buyers, StarProperty is shedding light on these missteps. The goal is simple: To help home buyers make more informed decisions and avoid the avoidable when buying your first property in Malaysia. 

Don’t accept the first loan offer

It can be tempting to accept the first housing loan offer your bank presents. After all, it seems convenient. It speeds up the process, cuts down on paperwork and lets you focus on other aspects of your property purchase. However, this seemingly simple decision could end up costing you thousands of ringgit over time.

Not all home loans are created equal. Banks offer varying interest rates, repayment terms and value-added benefits. That is why it is essential to shop around and compare options. By applying for multiple loan offers, home buyers increase their chances of securing a financing package that truly fits their financial situation. Even a slight reduction in interest, say, 0.1%, can translate into substantial savings over the lifetime of a 30-year mortgage.

One surprising insight many buyers overlook is that different branches of the same bank can offer different deals. How is that possible? Much of it comes down to the banker’s skill, experience and familiarity with the loan application process. In some cases, branch managers or loan officers may have limited discretion to tailor loan packages based on a borrower’s profile, local market conditions or internal performance targets. So, it is worth speaking to a few branches, even within the same banking group, to ensure you are getting the best possible deal.

Not engaging a property agent

Some buyers assume it is easier and cheaper to go directly to the developer, especially when purchasing new developments. But bypassing a professional property agent may mean missing out on valuable insight, negotiation expertise and hidden opportunities.

A registered real estate agent brings deep knowledge of the market. They are often the first to know about listings and can propose multiple options that suit a home buyer’s budget and preferences. Agents can also help buyers avoid overpriced listings and spot undervalued properties. In cases where a home buyer is unfamiliar with the legal and procedural aspects of a property transaction, having an agent on his or her side can save time, reduce stress and prevent costly mistakes.

Moreover, for sub-sale properties, agents can help with price negotiations, coordinate with lawyers and ensure the necessary checks are made on the title, ownership and outstanding bills. 

Focusing on the wrong factors

It is easy to be swayed by properties that look good on paper especially with well-marketed advertisements, brochures and honey-tongued salesmen harping on the ample square footage, multiple bedrooms or modern finishes. However, seasoned buyers know that more critical factors lie beneath the surface.

Location is paramount. Look beyond the four walls and ask if the neighbourhood is safe? What is the traffic like during peak hours? Are schools, hospitals and shops easily accessible? Also, for strata properties like condominiums, the management quality can make or break your living experience. Poorly managed buildings often suffer from maintenance issues, safety concerns and depreciating value.

Buyers should also pay attention to the cultural makeup of a neighbourhood, particularly if community and lifestyle compatibility matter. Before signing any documents, create a checklist of the must-haves and nice-to-haves and stick to it.

Overlooking hidden costs

A property purchase does not end with a down payment and monthly mortgage installments. There are several additional costs that many first-time buyers overlook.

These include the Memorandum of Transfer (MOT), legal fees, stamp duty and disbursement fees. While developers occasionally absorb some of these costs as part of promotional packages, that is not always the case. Buyers will need to confirm what’s covered and what’s not. Failure to account for these expenses can quickly throw one’s budget off track.

And don’t forget about the recurring charges. Property ownership comes with annual commitments like Quit Rent (Cukai Tanah) and Assessment Tax (Cukai Taksiran), which are mandatory government levies. These must be paid on time to avoid penalties.

Underestimating ongoing costs

Beyond the initial outlay, property ownership requires regular upkeep. For strata-titled properties, owners need to pay monthly maintenance and sinking fund fees. These fees cover security, landscaping, lift maintenance and repairs to shared facilities and these costs can climb steeply over the years.

For landed homes, owners are responsible for their own maintenance. Whether it is repainting walls, replacing leaking pipes or fixing a broken gate, such costs can come up unexpectedly. Renovations, both necessary and cosmetic, should also be factored into the long-term budget.

Keeping a clear record of property-related expenses can help one manage finances better. Set aside a contingency fund for unexpected repairs or renovations. A good rule of thumb is to allocate at least 1% to 2% of the property's value annually for maintenance and repairs.

What about buyers going solo?

Some buyers may be tempted to manage the entire process on their own. While the appeal of saving on agent fees is understandable, this route requires time, patience and a good grasp of the property market.

If buyers choose to go solo, they will need to be extra diligent with their research and study market prices, check comparable properties, understand legal documents and handle all negotiations themselves. They will also be responsible for coordinating with the lawyer, the seller and the bank.

They must be prepared for unexpected hurdles, like dealing with uncooperative sellers, incorrect paperwork or discovering encumbrances on the property title. Unless they are confident in their understanding of property transactions, the DIY approach may not be worth the risk.

Ultimately, the decision to engage an agent or go solo hinges on your personal confidence, time availability and familiarity with the property market. If they have the know-how and dedication, managing the process independently could work in your favor. But for most, the support of a trusted professional brings peace of mind and greater clarity.

A final word of advice: Whether buying a home to live in or as an investment, don’t rush. Take the time to understand your financial capacity, evaluate all costs and consult experts where needed. Even a quick discussion with a local agent can offer insights you have not even considered.

In real estate, knowledge is power and preparation is everything. By being informed, alert and strategic, your first property purchase can be the beginning of something truly rewarding.

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A longer time is not better

One common yet often overlooked mistake among home buyers is opting for a longer mortgage repayment period simply to reduce monthly installments. While this may ease short-term financial pressure, it often comes at a steep long-term cost. 

Buyers who can afford higher monthly payments but choose extended terms end up paying significantly more in interest. sometimes exceeding the original loan amount, making it a costly trade-off in the name of short-term comfort.

Using any online loan calculator, anyone can easily estimate their monthly installment commitments. Table 1 illustrates four loan duration options for a loan amount of RM500,000, showing the corresponding monthly installments, total interest paid and total repayment amount.

For instance, with a full 35-year loan tenure, the borrower would end up paying over RM1.2 million in total. Compared to a 20-year tenure, the difference is RM374,100 (RM1,268,820 vs RM894,720).

If a borrower can afford higher monthly payments without compromising their lifestyle, it is advisable to opt for a shorter loan tenure. Alternatively, choosing a full-flexi or semi-flexi loan instead of a basic loan allows borrowers to make additional payments toward the principal. This flexibility can help reduce either the monthly installment or the overall loan duration, depending on the loan terms.

Table 1: Loan duration options 

Source: StarProperty

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